Something worth watching could be happening at King & Wood Mallesons, one of the world’s largest law firms. It has an interesting history, a challenging present and, perhaps, an even more challenging future.
Beijing-based King & Wood came into existence in 1993. If you look for photos or other information about either name partner, you won’t find them. Neither person ever existed. China doesn’t have U.S.-type ethics rules requiring that law firms carry the names of lawyers who work there (or did before retirement or death). The distinctly non-Chinese names are a branding exercise aimed at reaching a global audience.
In 2012, King & Wood merged with Australian-based Mallesons Stephen Jacques. In 2013, it added London-based SJ Berwin and now has 2,700 lawyers scattered across 30 offices around the world. It operates as a verein, meaning that the constituent firms are legally separate and don’t share profits. (Whether any verein is a real law firm is a subject for another day.)
In July 2015, King & Wood Malleson’s Europe and the Middle East announced “rocketing” results. Profits per equity partner had soared by 39 percent. During the year, the firm hired 15 lateral partners, including attorneys from Fried Frank, Linklaters, and Eversheds.
As London-based (and newly named) managing partner William Boss boasted, “This is an exciting time for our region….”
Maybe a bit too exciting, even for Boss.
Two days later, The Lawyer offered a potentially relevant footnote to the “rocketing” 39 percent jump in partner profits reported only two days earlier: “A number of insiders have questioned the large jump in PEP, attributing the growth to an exceptionally big and anomalous recovery for the firm on one piece of litigation.”
At about the same time, the firm revealed that it had completed its “partnership review” resulting in an almost 10 percent reduction in its London office equity ranks, according to The Lawyer. In addition, the firm lost some “big hitters.”
On January 15, 2016, William Boss resigned as managing partner — more than a year before his term was set to expire in May 2017. The firm said that he would remain in the position until April while the search for his replacement occurred.
On January 20, The Lawyer reported that the firm had “launched a review of its capital contributions structure in order to ease cashflow, stop repeated delays to profit distributions and stem the flow of exits by ‘frustrated’ partners.”
What does that mean? Time will tell. But story in The Lawyer included these nuggets:
— “A number of sources close to KWM have accused the firm of withholding profit distributions over the last five years in order to keep up with tax bills, leading to a raft of senior exits last year.”
— “One source close to KWM said the firm had ‘only just’ paid out the full distributions due in August 2015, having previously paid just half the money owed in that quarter. Another said they had only been paid 25 per cent of their distributions for 2014/15, despite it being nine months into the financial year.”
— “Complaints about delayed profit payments follow a good year financially for the firm in the UK, Europe and Middle East, adding to the frustration of a number of partners, a source said. ‘It’s been a so-called record year for the firm but partners just aren’t getting paid,’ they added.”
— “The review could see its UK partners being asked to pay higher contributions to the firm in return for more units in the LLP.”
If the last item comes to pass, partners who write checks to the firm might want to understand exactly what they are buying and why.
Thanks once again for always worthwhile stories. I could do the research myself – but why not just ask you! What precisely are the benefits of a verein?
Proponents would say that it promotes cross-marketing among its member firms. In other words, it’s a branding exercise that seeks to maximize name recognition.
It also allows managing partners to claim that they run the biggest firms world. In other words, it’s a vehicle for ego gratification.
Ultimately, the verein is a manifestation of the “bigger is always better” mentality.
But that’s just my opinion.