‘Merger creates billion-dollar international firm,’ a Gazette headline announced a little over three years ago. The corresponding article reported on the tieup between Australian-Chinese firm King & Wood Mallesons and UK-based SJ Berwin, a partnership that promised to create of one of the world’s largest firms with offices in Asia, Australia and Europe – and more than 2,700 lawyers.

In January 2017 the European arm of the firm has plunged into administration. Stripped to the bones after an exodus of partners, with trainees’ contracts cancelled and nursing reported debts of £30m, the firm's fate is a sad postscript to the brave talk of 2013.

So why did it all go so wrong?

The blame game has already begun as leaked emails revealed this week suggest a falling out between two senior partners.

New York-based George Pinkham, in an email sent to all staff, blamed the ‘London management’ for the firm’s demise. Dubai-based Tim Taylor QC, referring to Pinkham and others with an abbreviation for a well-known insult, shot back: ‘a culture of self pre-occupation and blaming others might have contributed to this mess in the first place’.

For now, until administrator Quantuma can complete its autopsy, such allegations must remain speculation.

But experts on law firm management suggested that personal clashes may have played a role. Tony Williams, principal of Jomati Consultants, said: ‘For some years there has been a concern that the glue that held the original team of partners of together has not been as strong in subsequent teams.’

One former partner, speaking to the Gazette on condition of anonymity, appeared to back that view, blaming poor leadership and saying the origin of some of the problems could be traced back to the appointment of Jonathan Blake as senior partner.

Nursing reported debts of £30m, the firm's fate is a sad postscript to the brave talk of 2013

Blake, although a ‘brilliant lawyer, did not have the people skills to carry the job through’, the ex-colleague alleged. Blake was replaced by Stephen Kon in 2012 and it was Kon who steered through the KWM merger. The Gazette has contacted Blake for comment. 

At least one senior colleague was restless: head of corporate Steven Davis departed for Proskauer Rose, a firm he had previously tried to arrange a combination with.

According to insiders, KWM was hit by further problems in January 2016 when managing partner William Boss announced he would step down at the end of the financial year, in March. He was replaced by Tim Bednall in October.

‘How can a business run for six months with no managing partner?,’ one ex-partner said. ‘Who was minding the shop?’

A restructuring review in March 2016 concluded that the firm should streamline its 17 practice areas into three divisions – corporate finance and funds, dispute resolution and regulation, and real estate. Another former partner told the Gazette that the firm ‘began to lose its way’ when demand for fund management and private equity investment work declined in volume.

‘There was a big cull and a lot of very-high-billing partners left… it seemed as though the firm was saying ‘sorry you’re making too much money’. The firm was left with a large number of transactional lawyers who were all highly paid but no one wanted to invest in and use them.’

The firm’s Chinese and Australian offices have been isolated from events in Europe given its Swiss verein structure. The holding structure allows member firms to retain their existing form and manage their own finances.

Another former lawyer questioned the viability of such structures as the three entities ‘did nothing but co-exist alongside each other and shared no common values’.

On the merger, they added: ‘I think there was, and still is, a cultural divide between China and Europe. China is still in the early stages of development in terms of being an outward-looking country – they’re fearless negotiators but with that there was also no sense of loyalty from corporate clients.

‘There was also the loss of the SJ Berwin name. King & Wood and Mallesons Stephens Jaques were equals as the number-one firms in China and Australia but SJ Berwin was never the number one – it should have stuck to what it knew it was good at.’

Reports have also suggested that the firm may have overspent on its London offices in Queen Street Place. In 2005 SJ Berwin agreed a deal with the landlord under which the firm would cover the cost of renovation in return for a rent reduction for the first 10 years. It expired last year. The firm reportedly spent more than £30m on the refurbishment.

While speculation about financial woes had been rife for several months, the death knell finally sounded yesterday as Quantuma was confirmed as the administrator. Another potential administrator, AlixPartners, reportedly pulled out earlier this month over fears about how its work would be paid for.

For employees and creditors, the outlook is bleak. Williams told the Gazette it is ‘very unlikely that any dividend at all would be paid to unsecured creditors’.

Employees too will likely have to seek a government statutory redundancy pay-out, he added. In January last year, a Gazette analysis showed that unsecured creditors of collapsed law firms have been recovering less than 2p in the pound

One lawyer who worked at SJ Berwin and departed before the merger said there was ‘a terrific team’ of support staff who had been there for many years. ‘I do hope that their needs have been tended to. Everyone talks about the partners and associates but these were hugely important roles too,’ they said.


1966: Leeds solicitor Stanley Jack Berwin sets up practice in London. 

1993: King & Wood PRC Lawyers becomes one of the first firms to open in modern China. 

November 2013: SJ Berwin merges with Australian-Chinese King & Wood Mallesons to create a firm with combined turnover of $1bn (£700m).

March 2016: Asia-headquartered firm announces it is cutting 15% of partners in its Europe and Middle East practice as part of a ‘restructuring’ exercise.

November 2016: Hopes founder that the Chinese arm of the business might bail out the European and Middle East arm, leaving a rescue merger as only viable remaining option.

December 2016: Law firms touted as potential saviours, including global firm Dentons, are unable to pull off a deal.

December 2016/January 2017: Several high-profile partners depart the firm.

January 2017: Firm says it can no longer pay salaries and cancels all of its trainees’ contracts.

17 January 2017: Andy Hosking and Sean Bucknall of restructuring outfit Quantuma appointed joint administrators. Firm renamed as QSP Residual Recoveries LLP