Partners, fee-earners and staff – including secretaries and post-room staff – at King & Wood Mallesons (KWM) are mentally preparing for a second meeting this afternoon where they will undoubtedly be told that “Christmas is going to be tight”, said an insider.
The mood at the firm is despondent as KWM bosses told EUME fee-earners this morning that the China bail-out had failed and the verein would not be injecting millions of pounds into the partnership to help it meet its financial obligations to lenders and pay its rent.
One partner said he was “staggered” by the revelation. Another added he first started to “get an inkling” the deal would not go to plan on Friday, with the possibility reaching “Donald Trump levels of certainty” yesterday.
“This is terminal,” said a KWM insider, “it’s at least as bad as everyone is thinking”.
The rescue deal collapsed as financial backing from the Chinese and Australian partnerships was conditional on EUME partners contributing around £8m in capital to the firm.
Not enough partners agreed to the terms of the deal, which included submitting to a 12-month lock-in, and so there was not enough capital to supplement the £6m payment from China.
“This is about too many partners not having enough faith in the business to put the rest of the capital in,” said a source.
KWM has now announced it is looking to merge as one possible solution to secure its future. But partners are cynical about the possibility of it merging at this late stage and following its much-publicised financial difficulties.
One former partner said: “If there’s no merger then there’s no firm.
“The rescue deal was all put together by the new management [Tim Bednall and Michael Cziesla] going out to China. The offer was supposed to be what solved the financial problem, so any back-up merger discussions the firm has been having will be beyond the definition of nascent.”
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.
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 Bednall and Cziesla who were both elected in October, presented the deal to the partners on 10 November. The proposal came one day after the shock announcement that global managing partner Stuart Fuller will step down from the top job at the end of this year.