If you didn’t hear about the collapse of King & Wood Mallesons (KWM), where have you been the past year?
It is a cautionary tale for law firms who should take heed and examine this as a case study of why future mergers should be considered very carefully. Many will recall that KWM was formed by the joining of SJ Berwin and KWM in 2013, with the aim of creating a law firm with a prominent Chinese and European presence. Although this was achieved and the firm was recognised as a global firm - with the benefit of hindsight - it has become clear that this was achieved on a superficial level and the troubles ran deep. Although it was not the only cause of its downfall, a very weighty and key problem was the failure to integrate different cultures post-merger.
With the continued consolidation in the UK legal market, the DMH Stallard and Rawlison Butler to name but one, competition is heating up, so it is easy to understand why firms are looking to potential mergers to grow and secure their future. To ensure success law firms need to fully consider and put in place an effective strategy to join up different management styles and cultures when looking to merge. The KWM tale should serve as a warning to firms to take a cautious approach because if done badly, the brand damage could be irreparable.
In November 2013 the Chinese-Australian firm KWM merged with London law firm SJ Berwin to create a $1bn global business with 2,700 lawyers. Just over three years later, the European part of the new venture was dead. How KWM Europe fell apart became the stuff of legal legend, with tales of infighting, spiralling debt and employees jumping ship before the inevitable wreck. For one thing, some of the partners at SJ Berwin — a hard-charging London firm whose reputation and wealth were built on its private equity business — were reluctant to shed their former identity. An early, airline-themed marketing campaign bore the slogan: “KWM — fuelled by SJ Berwin”.