On 14 March King & Wood Mallesons SJ Berwin (KWM) announced that it is to close its Berlin office by May, following a strategic review of its presence in Germany.

The news makes it the latest in a number of international firms to change its position in the country, where UK and other global players have historically struggled to make the same inroads as elsewhere.  

Last month Sidley Austin confirmed it had put its Frankfurt office under review, following several recent partner departures, while Shearman & Sterling caused ripples in April when it pulled out of Duesseldorf and Munich.

For KWM, the move coincides with the decision by Berlin venture capital partners Frank Vogel and Jan Dirk Heerma to depart to set up their own boutique firm. Given the size of the office – and the likelihood that at least one of the three Berlin associates will follow Vogel and Heerma – KWM has decided to shut up shop, with litigation counsel Tilman de Vries relocating to Frankfurt. 

The office's third partner, Till Fock, who specialises in tax and regulatory matters, is considering his options, though the firm has offered to help him relocate to either Frankfurt or Munich.

"While we proactively manage our business, office closures are always difficult decisions," says managing partner Rob Day, who nonetheless stresses the decision was mutual. "We thank the team in Berlin for their contribution to the firm and wish them every success in the future."

The review of KWM's German practice also led to the replacement of German managing partner Ruediger Knopf in Frankfurt with co-heads Sonya Pauls in Munich and Frankfurt-based international management committee member Stefan Krueger earlier this year. 

All of this is being billed by the firm as "structural changes to enable it to be the right size and shape to grow in the core areas of business". Whether or not the venture capital team was deemed superfluous to that size and shape, it is clear that without it the cost of having an office in Berlin was not sustainable. And as with any small office, the impact of just a few personnel departing will always be amplified.  

In 2011 Mayer Brown disbanded its small Berlin operation for similar reasons, choosing to relocate partner and former European Parliament member Friedrich Merz to Duesseldorf. Hogan Lovells also closed its base in the German capital, after its entire office departed to Morrison & Foerster in September 2013.

But those on the ground believe that while Berlin may not be the centre of financial activity in Germany, there are still opportunities for international law firms, particularly those with strong policy and real estate practices. Especially given that the German legal market remains generally buoyant.

"It is a bit difficult to draw parallels between these instances," suggests Linklaters' senior partner for Germany, Carl-Peter Feick. "The outlook for German legal services is stable and even growing, with positive market sentiment, but for any law firm it is sensible to review the merits of running very small boutique offices."

The difficulty for international firms though is that, with each of the major German cities acting as a hub for different types of legal work, many firms feel the need to have multiple offices across the country. 

But for Hengeler Mueller co-managing partner Daniela Favoccia, this will not guarantee the best work: "It is our experience that, in high-calibre international transactions, law firms are not chosen for the number of offices they have. It is the ability to develop, negotiate and implement economically successful solutions that makes the difference."

Certainly, given many firms' multiple German bases and the competition from strong local outfits alongside the numerous global players present, it is an expensive country in which to get it wrong.

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