King & Wood Mallesons.
King & Wood Mallesons. (Courtesy photo)

King & Wood Mallesons’ (KWM) management told clients this week that the collapse of its legacy SJ Berwin business in the U.K. and Europe was the result of poor leadership and a lack of consensus among European partners, and described how the firm plans to rebuild its operations across the region.

In a statement dated Jan. 19 and posted in Chinese on the social media app WeChat, King & Wood Mallesons’ China management committee references the failure of last October’s Europe, U.K. and Middle East (EUME) recapitalization plan, which had aimed to bring in £14 million ($17.3 million) and reduce debt, which had risen to £35 million ($43.2 million).

“Unfortunately, due to a lack of core leadership and a common ground among partners, the recapitalization plan failed and created a financial crisis at the firm,” the statement said.

The firm’s China arm subsequently offered to provide financial support with a revised proposal that would have secured the European arm’s future, but just 21 partners—about 16 percent of the firm’s European partnership—agreed to commit in full to the new deal.

“KWM China, during the most difficult time, offered a bailout plan,” the statement said. “Unfortunately, that plan was also unsuccessful due to the lack of consensus among European partners.”

The statement emphasized the efforts made by China to keep the business going, noting that “senior partners from KWM China spent days and nights working out of offices in London, Paris and Frankfurt to talk to and encourage colleagues there.”

It then goes into detail about how KWM’s management will be more heavily involved in directing the 33-partner business it has established in the wake of the administration.

“Although what happened at SJ Berwin is now irreversible, KWM China was able to pivot to a new U.K., Europe and Middle East strategy,” the statement said. “Based on the trust we were able to build over the past three years, a number of the legacy SJ Berwin partners and their team have decided to join KWM China and continue their work for clients.”

Referencing the lessons the firm has learned over the last year, the statement said that KWM China will actively manage the new operation, which will remain structured as a verein and for regulatory reasons cannot be directly integrated or led by China. The new firm will focus on cross-border M&A, intellectual property, finance, competition and disputes.

“The biggest difference with the Swiss Verein structure is that the operations of U.K., Europe and the Middle East offices will now operate under the unified management of KWM China. This is a fundamental change and upgrade of KWM’s globalization,” the statement said. “This new strategic expansion is an important step in KWM China’s goal of becoming a global firm.

The new structure, the statement continued, will give KWM China the ability to directly serve clients in Europe and the Middle East and also help “strengthen KWM China’s professional reputation, paving the way for the firm’s further globalization.”