SJ Berwin partners have voted to combine with King & Wood Mallesons (KWM) on 1 November 2013, in the first ever tie up between two major UK and Asian Pacific firms.
SJ Berwin will become one of four partnerships under KWM’s existing Swiss Verein, which already consists of financially independent arms in China, Hong Kong and Australia.
The combination will produce one of the top 25 law firms in the world by revenue, with 553 partners, 2,233 lawyers and 30 offices. Total turnover will be more than $1bn.
The tie-up will be non-financially integrated, but will require SJ Berwin to phase out its longstanding name – used by the firm since it was founded by Stanley J. Berwin in 1982 – in order to be consumed by the Sino-Pacific giant’s brand.
The combined firm will be known as King & Wood Mallesons SJ Berwin in the UK, Europe and the Middle East for a transitional period before the SJ Berwin name is permanently dropped.
SJ Berwin managing partner Rob Day commented: “We recognise that the right thing for our global firm is to end up with a common global brand. We’ll use the transitional name, brand and logo as long as necessary to make sure that our strength and what we have to offer is recognised.”
SJ Berwin senior partner Stephen Kon added: “It’s a logical step for us to embrace fully the Asia opportunity and build the first international firm with the real substance for the future.
He continued: ”Our practice will continue to operate as it has and it won’t change, except now we’re part of a much larger combination. Our day to day work will continue as it has done in the past.”
Wang Ling, Chinese managing partner of KWM added: “Our clients are rapidly globalising. This combination with SJ Berwin provides us with the strength and depth and a quality international platform to help them navigate the complexity of inbound and outbound Chinese investment around the world.”
In jurisdictions where both firms have offices, lawyers will move into the premises of whichever firm has the most established presence. In Hong Kong, China and Australia, SJ Berwin will move into KWM offices, while in London and the rest of Europe KWM lawyers will move into SJ Berwin’s existing premises.
The merger will see KWM chairman Wang Junfeng become global chairman of the combined firm while SJ Berwin senior partner Stephen Kon and Mallesons chairman Stephen Minns have been named as joint deputy global chairs. The managing partner of each of the four partnerships will sit on the executive committee, dealing with the day to day management of the firm.
SJ Berwin partners were alerted of the imminent vote on 17 July and began casting their ballots via an online system last Wednesday (24 July) in an escalation of the voting process, originally touted to take place in the Autumn (17 July 2013).
On the KWM side, partners voted earlier today – at 1pm Hong Kong time and 3pm Sydney time. The firm said the motion secured a “substantial majority” from each of the four separate partnerships.
Each unit of the combined firm voted separately on the tie-up meaning that any of the quartet could have vetoed the deal. The Chinese and Hong Kong partnerships were thought to be in favour of the move. Its biggest detractors were reportedly amongst KWM’s former Mallesons partners in Australia, who previously engaged in merger talks with larger UK firms including Clifford Chance.
The mood at SJ Berwin, however, was largely positive. A partner said: “Assuming the merger goes ahead it will create opportunities. The chemistry is good and it will improve even further. It will bring in more work and from where I stand, I think we’re all very positive about the future.”
Another source close to the firm noted that some partners at the top of equity are less than happy about the move, citing concerns of a challenge to their authority.
The firm does not anticipate to make any redundancies to result from the merger, adding that headcount is expected to increase in London, Hong Kong and Shangai.
It has been widely touted that KWM’s next step is to embark on a US merger. Kon confirmed that the combined firm intends to compete at a global level, and “the US is part of that.”
The Lawyer first broke news of the potential merger in November 2012. Talks were understood to have kicked off in early summer 2012 at the latest, with the idea thought to have been initiated on the SJ Berwin side by former senior partner Jonathan Blake. The concept was not formally put to partners, however, until this year’s annual partnership retreat which was held in Marbella on 8-9 June (7 June 2013).
Both firms have been seeking merger partners for some time. SJ Berwin was engaged in discussions with Proskauer before the deal was called off in November 2010 (15 November 2010), followed by brief talks with other US firms including Mayer Brown in spring 2012 (22 May 2012).
KWM is also understood to have engaged in initial merger discussions with a number of UK firms after its tie up with Mallesons in March 2012, including with Berwin Leighton Paisner.
King & Wood Mallesons has declined to release financial results for 2012/13. Last year its Australian revenue was A$424m (£276m) while its Chinese arm brought in roughly RMB1.6bn (£160m), giving the Asia Pacific firm a total income figure of around £430m.
SJ Berwin’s revenue increased by 2.5 per cent from £180.1m to £184.6m in 2012/13. Net profit jumped up by about a third, from £49.7m last year to £65.9m. Meanwhile, profit per equity partner (PEP) dropped by 11 per cent, from £635,000 to £565,000. It is the first year that PEP has fallen since 2008/09 when it fell by 49 per cent to £410,000 (29 July 2009).