The ripple effect: partners size up the impact of KWM's European crisis on its Asia business
As KWM Europe draws ever closer to a rescue deal with another firm, partners assess how its problems will affect the firm in Asia and Australia
December 12, 2016 at 06:41 AM
4 minute read
How has the turmoil in King & Wood Mallesons' (KWM) European arm affected the firm in the Asia-Pacific region? Not so much, say sources inside and outside KWM.
"It is still one of the best and the most internationalised firms in China," says a partner with a rival Chinese firm. "That reality is not going to change."
KWM has stressed that its current problems in Europe are "contained to that region", and that collaboration between the firm's China and Australia arms has not been negatively affected.
In the early days following the first ever combination of a Chinese and an Australian firm in 2012, KWM saw its share of partner turnover. In 2013 and 2014, prominent departures included former Australian managing partner Tony O'Malley, Sydney-based former global litigation head Beau Deleuil and Bai Yanchun, co-founder of legacy China firm King & Wood.
But in the past few years, key partner exits have been less frequent and three of the firm's partnerships in the region have generally seen strong financial results. In the financial year that ended 30 June 2016, the Australian partnership saw a 6% growth in revenue, according to the firm. The Hong Kong partnership recorded a 23% growth in revenue between 2014 and 2016, and in 2015 the China partnership's revenue reached $350m (£278m) revenue, the second highest among all Chinese firms surveyed by Legal Week sister title The Asian Lawyer.
Meanwhile, the firm has taken steps to improve integration and coordination throughout the region. KWM expanded its internal transfer and secondment programs in 2015, moving 65 lawyers and staffers to different offices, short term or long term, a 38% increase from the previous year.
"We are in very regular communications with the Australian partners and frequently cooperate on deals," says one China-based partner.
In 2016, Beijing-based Xu Ping and Jonathan Grant teamed up with Sydney-based Shannon Finch to represent Shanghai Pharmaceuticals Holdings and Chinese private equity fund Primavera Capital on a $233m (£185m) acquisition of Australian supplement maker Vitaco Holdings.
Deal work for mine operator China Molybdenum – a $1.5bn (£1.19bn) acquisition of mining businesses in Brazil and a $2.7bn (£2.14bn) investment in a copper and cobalt mine in the Democratic Republic of Congo – brought together lawyers from the firm's China, Hong Kong, Australia and London offices. But the London portion was anchored by Tim Bednall, an Australian partner who at the time was on secondment in London. (Bednall was elected in October as the European partnership's new managing partner.)
Lawyers say there has always been more interaction between the partnerships in China and Australia than between those in China and Europe.
"We are of similar size and we are closer to each other geographically, and in terms of timezones," says one China-based lawyer, who added that interaction between European and Chinese partners has been limited because there have not been many joint projects.
"Chinese partners will reach out and set up regular communications with European partners," the lawyer says. "But these things take time to come to fruition."
That limited collaboration, coupled with the financial independence of the verein's various parts, means that the firm's troubles in Europe have so far had minimal impact on the Chinese partnership.
And KWM insists that its overall brand remains strong, citing a recent ranking by UK market research firm Acritas, which earlier this year ranked KWM as the best-known law firm in the Asia-Pacific region, after surveying some 600 legal buyers.
Of course, it does not hurt that KWM continues to be known by many in China by its Chinese name, Jin Du. Unlike rival firms such as JunHe and Zhong Lun Law Firm, legacy King & Wood adopted an English name early on, as part of a strategy to attract multinational clients. But lawyers say the firm is still commonly referred to in China as Jin Du.
That distinction may also be a symptom of the greater problem facing the firm as it has attempted to combine three distinct businesses and partnerships.
"It underscores a clash of different cultures," says the rival firm partner. "And this will not only challenge KWM's globalisation plans, but will also slow down the entire process for all Chinese firms attempting to internationalise."
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