King Wood Mallesons Looking To Raise Capital

King & Wood Mallesons, the mega-law firm formed by Australian, London and Chinese firms, is in talks to raise capital from partners in Europe in a review of the firm’s overall financial structure, its global managing partner told Big Law Business.

Among other changes, the firm has brought in a new Chief Financial Officer, Michael Boot, who joined in October from Clifford Chance, and helped develop a five-year plan that includes directing resources to certain clients and markets.

“What we need to do is integrate the firm,” said Stuart Fuller, the 49-year-old banking lawyer, in his first interview on the changes.

Fuller declined to comment on many specifics of the five-year plan, called “2020,” but said part of it would entail strengthening the firm’s European business, which he confirmed has struggled with some cash flow issues because of its “transactional nature.”

“With the private equity and corporate practice, most of the clients in the market say, ‘Bill me at the end of the matter’… instead of maybe a litigation or advisory practice, where you bill monthly or quarterly,” he said.

Stuart Fuller, global managing partner, King & Wood Mallesons.

As a result, payment distributions to partners have not been made on time, Fuller said: “This is not ideal, but is a result of a number of factors, including the transactional nature of our practice and our current working capital cycle.”

In recent days, the London publication, The Lawyer, reported that lawyers complained that the firm had delayed profit distribution. It also reported that the firm had initiated a review of its capital program.

Fuller said firm leaders are in the process of asking partners to contribute more capital, although he declined to say exactly how much is being proposed. They are also in talks with lenders about how to finance the capital contributions.

As for the justification behind the proposed capital increase, Fuller said that the firm’s European partners don’t pay as much in capital as partners in other regions, nor do they pitch in as much as many competitor firms require.

With more than 2,000 lawyers and $1 billion in revenue, King & Wood Mallesons is a product of two large scale mergers: in 2012, China’s King & Wood PRC Lawyers merged with Mallesons Stephen Jaques of Australia, and then what became King & Wood Mallesons merged with SJ Berwin of the United Kingdom in 2013.

King & Wood Malleson is structured as a Swiss verein, meaning that it operates under a single firm brand but maintains separate profit centers throughout the firm. Its European offices, according to the firm’s website, are Belgium, France, Germany, Italy, Luxembourg, Spain and the United Kingdom.

The review of King & Wood’s financial structure comes after a number of management changes: Its European managing partner William Boss is set to step down from his post in April and the firm has commenced a process to appoint his replacement. In October, Rachel Reid, the chief operating officer of King & Wood Mallesons EUME, left the firm, and since then Tim Finlayson, the firm’s Australia COO has been put in her old role on an interim basis.

“We have started the process to recruit a replacement COO whose role will include leadership of global projects and our EUME operations,” said Fuller in a follow-up email.

Peter Zeughauser, a law firm consultant, said that the firm’s plan to raise capital in Europe and integrate its business over five years “is a healthy sign, as is ensuring that each region’s balance sheet is strong with appropriate capital.”

He also said that the moves show that King & Wood is becoming more of a “‘one-firm’ firm,” following the path of Baker & McKenzie.