Mark Schaub
Mark Schaub ()

“It’s a very, very different situation this time round” says KWM Shanghai partner Mark Schaub when asked about the Asia-Pacific firm’s odds of European success in the wake of this week’s collapse of the legacy SJ Berwin business.

The administration means the Asia-Pacific giant has lost the bulk of its EMEA practice but, from the wreckage, China has salvaged a 33-partner business, with Schaub (pictured) personally playing a key role in negotiations with European partners.

It is providing funding to eight offices across EMEA and the US, and this time round there will be less room for the individualistic partner behaviour that ultimately led to the UK’s biggest-ever law firm collapse.

“If China is going to be involved in the funding and involved in it financially, I think there’s a feeling that these offices we’re supporting shouldn’t be any different for us emotionally than an office in Chengdu,”  Schaub explains.

“Our firm has grown from four people in a hotel room in 1993 to thousands of people now, and we’ve only ever closed down one or two window offices in China. We have a track record of being able to expand and open new offices and we’ll have the measures in place and provide adequate resources to ensure nothing goes off the rails this time.”

Regulations will prevent the European business from being integrated into China or directly led by China. However, according to Schaub, KWM 2.0 will be much more closely aligned with Asia.

As a first step towards this integration, all of the remaining EMEA partners will fly to China in February to attend KWM’s annual partner meeting which, this year, will devote a significant amount of time to looking at how to relaunch the EMEA operation.

Though the business will operate as a single firm, each office is being funded separately and will form a separate part of the umbrella verein alongside Australia, Hong Kong and China.

“We have a bunch of partners who are young and enthusiastic in our core markets in Europe, so we will now be working out how best to relaunch, take care of our existing clients and maximise our network,” says Schaub.

It won’t be rewarding if they’re only doing China outbound or referral work

Referrals will play an important role in this – particularly in London and Germany – but they are not the sole ambition.

“We have never thought these will be boutique offices to deal with China outbound work,” explains Schaub. “The deal will be to scale up to a degree and to be domestically facing – referral work will be an added bonus.”

With four partners left in Germany, building up there, particularly in corporate, will be an early priority, with further expansion also on the cards in London, where seven partners remain with the business, as well as a number of associates and support staff.

Schaub will not be drawn on whether the firm would ever go near another European combination as large as its 2013 union with legacy SJ Berwin, but is undaunted about the prospects of success.

“We’ve had quite a few people enquire already about joining, but it’s too early at the moment. The important part will be ensuring that those wanting to join can build a domestic practice – it won’t be rewarding if they’re only doing China outbound or referral work.”

With only 33 partners, the new business is only a fraction of the size of legacy SJ Berwin, making integration efforts far more straightforward.

We’ll need to have some people helping to integrate, but it won’t be oppressive or sinister

“It will be easier to get more familiar with them,” says Schaub, who specialises in foreign direct investment, M&A and restructuring. “If you look at the Australian firm and the China firm, we have a lot of cross-referral work between us, but these cross-referrals don’t really change the life of individual partners because they are part of large firms. With big firms referring to a smaller firm, it will make a bigger difference.”

“It won’t be a dictat from China about how the European offices will operate, though – we’ll have a collaborative exercise to see where there are opportunities. We’ll need to have some people helping to integrate, but it won’t be oppressive or sinister.”

Leadership of the new business is still to be determined, as is the composition of any team to be pulled together to look at integration.

While the KWM brand has clearly sustained significant damage in Europe, Schaub is confident the problems will be seen as endemic to the legacy SJ Berwin firm and its partners and management, and not the actions of the firm’s China or Australia arms, which will remain heavily involved in the business – even though they have not invested financially.

He concludes: “I think people see this [the administration] as SJ Berwin, not KWM. There was no loss of confidence in the brand – they were still a profitable firm and they were still getting instructions, but there were management problems.

“SJ Berwin partners were known for having sharp elbows, and that worked in boom times, but the corporate culture and some unfortunate management decisions definitely played a role here.”

Originally published on Legal Week. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.