The joint administrators of King & Wood Mallesons (KWM) have accused partners who left in the final months of the firm of “accelerating the ultimate demise” of the business.
In the first interim report to creditors, released today, Quantuma’s Andrew Hosking said it was “too early to present a full picture of the reasons for the collapse of KWM but it was clear that, despite attempts to restructure to reduce overheads in early 2016, it had proved impossible to reach agreements on funding and the way forward with partners”.
“The administration was the only resort left to the firm which saw an accelerating rate of partner and staff departures during 2016 as the extent of the firm’s financial difficulties became apparent.”
He continued: “By 22 December 2016, it had become apparent that KWM required funding above the level available to it and that it would not be in a position to meet salary costs beyond early January 2017 and to meet the partners’ Schedule D1 tax liability due on 31 January 2017.”
The report went on to say that “as part of the earliest restructure attempts, 20 partners left KWM and a number followed of their own volition”.
He said that extensive and detailed negotiations on a rescue package continued throughout 2016 but ultimately a proposal for a revised support package was not supported by a sufficient number of partners of KWM.
The report detailed that at the end of the 2015/16 financial year, on 30 April 2016, KWM comprised of 163 partners and over 900 staff, generating revenues of approximately £177 million to that date, with the majority of revenue and profit deriving from the UK, France and Germany.
Hosking and colleague Sean Bucknall were appointed administrators to KWM LLP on 17 January after AlixPartners walked away from the administration due to “concerns over funding”.
Immediately after their appointment the administrators set about renegotiating terms of the sale of the business to other law firms, which include Goodwin Procter, DLA Piper, Greenberg Traurig, Reed Smith and KWM China.
Now a number of partners, their work in progress (WIP) and accounts receivable have been transferred across to their new firms.
The highest number of partners were sold to Reed Smith – a total of 12 partners, according to Quantuma. The second highest number of partners (11) were sold to KWM China, followed by DLA Piper which bought out eight partners.
According to the interim report, sales completed by the administrators on appointment included:
- Six partners, WIP and accounts receivable to Greenberg Taurig
- Eight partners, WIP and accounts receivable to DLA Piper
- 11 partners, WIP and accounts receivable to KWM China
- 12 partners, WIP and accounts receivable to Reed Smith
- The sale of King & Wood Mallesons in Spain to the partners
KWM China also “entered into agreements with approximately 40 partners for their departure”, which was agreed to by the administrators.
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