'Administration was the only resort left' - Quantuma says partner exits accelerated legacy SJ Berwin's collapse
KWM administrators say high profile exits sped up the demise of the firm
January 24, 2017 at 10:26 AM
2 minute read
The administrators of King & Wood Mallesons' (KWM) European arm said partner exits "accelerated the ultimate demise" of the firm in their first creditors report.
In a statement released by Quantuma today, the company said administration was the only resort left to the firm after partners refused to commit to refinance the firm and the legacy SJ Berwin business was unable to meet financial requirements.
In the statement, Hosking said: "By 22 December 2016, it had become apparent that KWM required funding above the level available to it and that it would not be in a position to meet salary costs beyond early January 2017 and to meet the partners' Schedule D1 tax liability due on 31 January 2017."
The statement continued that it is "too early to present a full picture of the reasons for the collapse of KWM". However, it added that it had "proved impossible" to reach agreements on funding and a way forward with partners.
In November, the Chinese arm of KWM offered financial assistance to the troubled European partnership, as long as partners agreed to a lock-in and to contribute around £14m in capital into the firm. However, just 21 of King & Wood Mallesons' European partners agreed to commit in full to the plan.
The report also details the sales made by the administrators of whole partner teams to a number of firms, including six partners to Greenberg Traurig, eight partners to DLA Piper, 11 partners to KWM China and 12 partners to Reed Smith.
Overall, on an individual basis KWM has entered into agreements with around 40 partners for their departure, with each one approved by the administrators.
Prior to administration, seven partners and their work in progress and accounts receivable had already transferred to Goodwin Procter.
The KWM Spain business was sold by the administrators to the partners in that office.
KWM's European collapse last week represents the largest ever failure in the UK legal market. At its height in 2007-08, legacy SJ Berwin was ranked 14th in the UK top 50, with revenues of £215m and profit per equity partner of £801,000.
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