Morgan, Lewis & Bockius has emerged as a potential partner to King & Wood Mallesons (KWM), despite the US giant also being targeted by CMS Cameron McKenna as its long-coveted US suitor.
A Morgan Lewis partner has told Legal Business that talks to combine with KWM had been on and off for months but KWM had been eager to press ahead with conversations in recent weeks. With 520 equity partners, the top 20 US law firm has a profit per equity partner (PEP) of $1.54m and revenues in 2015 of $1.84bn. In contrast KWM has over 550 partners around the world and PEP of $900,000.
It is understood that the talks were led by Morgan Lewis chair Jami Wintz McKeon and involved the possibility of a multi-profit centre union using a Swiss verein structure initially to ‘test the waters’.
However, the Morgan Lewis partner said talks had become strained since the resignation of KWM City funds partner Michael Halford, who had been central to the discussions, but they had not been officially called off. The departure of Halford last week and three fellow partners in London saw KWM halt a planned recapitalisation after a 2016 dominated by departures in Europe to reassess its options.
The talks come as KWM Europe, UK and Middle East (EUME) managing partner Tim Bednall and senior partner Michael Cziesla have flown to China to talk about the future of the firm amid a turbulent period for its European practice, which joined KWM through the 2013 merger between KWM and SJ Berwin. It is understood that talks are ongoing for the Asia-Pacific business to offer support to the EUME partnership to help stabilise the firm in the region. Moves by the larger Asia Pacific business, which is still growing at more than 20% a year in China, may involve lock-ins with the EUME partnership, which is a separate profit centre, in return for financial commitments or guarantees to the business.
The Morgan Lewis partner added that while many US law firms were interested in KWM’s Chinese arm, its large Australia business would put off some US rivals.
The partner added that while Morgan Lewis was likely to not be the only firm seriously approached, ‘I think they liked us best.’
However, KWM is not the only firm vying for a union with Morgan Lewis, as Camerons has approached the firm ‘quite aggressively’ in recent months. The partner said that Camerons had indicated that Morgan Lewis was its preferred choice of US suitor.
The Morgan Lewis partner added: ‘However, there are partners in the US who feel CMS partners are in a different standard from Morgan Lewis, plus there is an issue with the German arm.’
A former Camerons partner said: ‘I would have thought the PEP levels at Morgan Lewis were too strong. I don’t think Camerons would have fitted too well with a New York firm, but an East Coast firm would be good for them. I have a high level of confidence the firm would be interested in Morgan Lewis. It’s a tightly run, profitable outfit.’
Camerons is currently moving to implement its combination with Nabarro and Olswang, with partners at the three firms having voted to merge last month. When the three-way merger goes through the combined firm will have revenues of more than £400m in the UK.
Morgan Lewis is no stranger to rescue deals, having in 2014 completed a ‘transaction’ which saw 226 partners and more than 525 other lawyers, legal professionals and staff move over from Boston-bred Bingham McCutchen.
Morgan Lewis, KWM and Camerons declined to comment.
sarah.downey@legalease.co.uk, matthew.field@legalease.co.uk
Read more in the opinion piece: ‘Comment: The moment of truth arrives in the SJ Berwin saga’
Read more analysis in the feature: ‘Branded – Inside the troubled takeover of SJ Berwin’
