King & Wood Mallesons’ Chinese rescue deal has failed, The Lawyer has learned.
It is understood the Chinese and Australian arms of the verein were willing to consider providing financial support on the basis the EUME partnership would put in a chunk of capital to the firm.
A spokesperson said this cash “was not forthcoming”.
It is also understood not enough partners agreed to other terms of the deal including to being locked-in for a year.
The firm released a statement today (22 November) saying the EUME arm has failed to secure financial backing from other parts of the verein.
It continued: “Regrettably, insufficient value of new capital was committed” following the well-publicised China bail-out plan.
It then revealed the firm was “considering a range of strategic options, including mergers, in conjunction with the firm’s bankers and financial advisers”.
When asked by The Lawyer how the bank was involved in negotiating the future of the firm, a KWM spokesperson said: “It is entirely normal in a situation such as this that a business would seek to work alongside its bank to seek to establish a solution in the interests of all parties.”
When asked if the legacy SJ Berwin business would be able to secure a new merger, the spokesperson added: “It’s too soon to say, we’re considering all of our strategic options.”
Sources close to the firm said there was “no confidence” that management would be able to secure another rescue deal.
Consensus among the staff is that they are “fully expecting KWM to collapse” as a result of today’s announcement, according to a source close to the firm.
The China rescue deal followed KWM’s previous plan to recapitalise the firm failing due to “revenue implications”.
How the story unfolded:
- 18 Nov: Dewey administrator adviser drafted in on KWM rescue deal
- 21 Nov: KWM losses continue as Dubai partner leaves for Dechert
- 11 Nov: KWM China bail-out: Partners have a week to agree to 12-month lock-ins
- 10 Nov: KWM global boss Fuller steps down
- 4 Nov: KWM energy team departs for Squire Patton Boggs
- 28 Oct: Exclusive: KWM former managing partner Day heads for Proskauer
- 27 Oct: KWM’s recapitalization scheme stumbles and four stars quit
Around 98 per cent of EUME partners had voted to inject £14m of capital into the firm over the summer, but the plan faltered after several big-billers resigned on the same day. The latest exits included former managing partner Rob Day and head of investment funds Michael Halford.
CMS Cameron McKenna head of banking and finance Rita Lowe has been advising KWM on its proposed China rescue deal, The Lawyer revealed last week.
Lowe has spent her career advising law firms and other businesses on administrations and significant restructurings, including Halliwells, Manches, Challinors and, the largest ever administration of a law firm, Dewey & Le Boeuf.
New EUME management Tim Bednall and Michael Cziesla who were both elected in October, flew out to China earlier this month to hash out the rescue deal with Chinese bosses and Fuller after its planned capital call failed.
They then presented the deal to the partners on 10 November, one day after a shock announcement that global managing partner Stuart Fuller will step down from the top job at the end of this year.
The KWM statement in full:
“It was announced today that King & Wood Mallesons EUME has not been able complete its planned recapitalisation programme. The programme was paused at the end of October 2016 whilst the firm assessed the financial impact of a number of partner departures.
“Having completed its assessment, a revised plan was submitted to the EUME partnership under which the same level of new partner capital was required, but with the financial support of the verein member firms. Regrettably, insufficient value of new capital was committed.
“The firm will continue to service the needs of clients, operating on a business as usual approach. The EUME Partnership Board and management are considering a range of strategic options, including mergers, in conjunction with the firm’s bankers and financial advisers. A further statement will be made in due course.”
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