King & Wood Mallesons' (KWM) China management team has blamed poor leadership and a lack of consensus among European partners for the collapse of the legacy SJ Berwin business.

In an statement to clients shared by the firm on social media, KWM's China leadership team sets out what it believes are the reasons for the failure of its Europe, UK and Middle East (EUME) arm, as well as the firm's strategy for rebuilding what is left of its operations across the region.

The email, dated 19 January and signed by the China management committee, references the failure of last October's recapitalisation plan, which had aimed to bring in £14m from partners and reduce the firm's debts, which had risen to around £35m.

It states: "Unfortunately, due to a lack of core leadership and a common ground among partners, the recapitalisation plan failed and created a financial crisis at the firm."

The firm's China arm subsequently offered to provide financial support in a revised deal that would have secured the European arm's future, but just 21 partners – around 16% of the firm's European partnership – agreed to commit in full to the new deal.

The email states: "KWM China, during the most difficult time, offered a bailout plan. Unfortunately, that plan was also unsuccessful due to the lack of consensus among European partners."

The email emphasises the efforts made by China to keep the business going, and goes into detail about how it will be more heavily involved in directing the 33-partner business it has established in the wake of the administration.

It states: "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. Although what happened at SJ Berwin is now irreversible, KWM China was able to pivot to a new UK, Europe and Middle East strategy. 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 during the past year, the email states that KWM China will actively manage the new operation, which will remain structured as a verein and for regulatory reasons cannot be directly integrated with or led by China. The new firm will focus on cross-border M&A, IP, finance, competition and disputes.

"The biggest difference with the Swiss verein structure is that the operations of the UK, 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 globalisation.

"This new strategic expansion is an important step in KWM China's goal of becoming a global firm. Not only does it give KWM China a direct channel to serve clients in Europe and the Middle East, it also helps strengthen KWM China's professional reputation, paving the way for the firm's further globalisation."