It had been a long time coming: the European arm of law firm King & Wood Mallesons appointed administrators on 17 January, putting the lid on a messy few months.
In total, 40 of the 131 Europe-based partners, including prominent private equity lawyers Michael Halford, Sabine Schomaker and Clemens Niedner, quit in the last three months of 2016.
SJ Berwin merged with Chinese-Australian King & Wood Mallesons in 2013 to create what was supposed to be an unrivalled international firm. Instead the European arm – the ex-SJ Berwin – sank under £35 million ($43 million, €41 million) of debt. Where did it go wrong?
Several sources told Private Equity International there were stark differences in the expectations of the private equity-focused SJ Berwin team and their new colleagues.
SJ Berwin partners expected investment to be made in its core practices – funds and private equity – so they could be expanded across the firm’s global platform. But the Asia-Pacific arm was keen for the Europe team to refocus on other areas such as dispute resolution, according to sources.
A mid-2015 strategic review resulted in the departure of more than 15 equity partners in Europe. This was followed by a restructuring in March 2016, in which around 15 percent of partners left, including a number of high-billers. This widened the rift between the regional arms of the firm.
The departure of a six-strong Paris-based private equity team, one of the firm’s most profitable practices, in April 2016 compounded financial difficulties. Among them was Maxence Bloch, the European branch’s representative on the firm’s board. This spooked several other partners.
The departure of numerous partners meant outgoings skyrocketed, as the firm is required to repay capital to leavers within 30 days.
Barclays Bank demanded increased security against its lending to the firm in July.
Partners voted unanimously for a £14 million recapitalisation plan, but this fell through when head of investment funds Michael Halford and several other key figures tendered their resignations in October. A rescue deal put forward by the Asian end also collapsed.
After administrators were appointed, the firm confirmed the rescue of select European and Middle Eastern offices: London, Frankfurt, Dubai and Riyadh, plus some affiliated offices. They will now focus on the core practice areas of corporate M&A, finance, competition and dispute resolution.