Happy New Year, profession. Barely have we gotten into 2017 and the inevitable has happened: the legacy SJ Berwin business has entered administration, becoming the largest collapse in European legal history.
From the point last spring that a high-billing Paris private equity team quit for Goodwin Procter, it was hard to see King & Wood Mallesons’ (KWM) European business avoiding a bad outcome. But this comment is not really about KWM’s fate, more about how we try to interpret events and re-write history after the fact.
Take Halliwells, until last month Europe’s biggest legal insolvency. In the aftermath a once-lauded institution was vilified, in some cases by the same people who did the lauding. I would argue that Halliwells was a well-run business that made one or two bad judgement calls that – thanks to largely unforeseeable economic events – had disastrous consequences. In that case a £24.5m property deal punched a hole in its finances at the wrong time. In itself it was a reasonable bet but the spoils were handed out in a way that harmed the business long term. And it was done in a way that divided the partnership, and law firms struggle to come back from that.
But that is business – you make your decisions in an environment in which you have to make wild guesses about the outcome. Sometimes they are right, sometimes wrong – often people in the business do not even know if chance or agency gets you the result. Halliwells managing partner Ian Austin was no villain to me, I quite rated him actually.
Halliwells managing partner Ian Austin was no villain to me, I quite rated him actually.
But then the need to pretend we comprehend more than we do grips, hindsight bias takes hold and blame gets parcelled out. ‘The market’ talks, the pundits opine, ex-partners sing and we all get too self-righteous. Journalists, being hugely disposed to pomposity once past the age of 26, are usually the worst offenders. I flatter myself I have a pretty sound take on the legal services market but I have lost count of the wrong judgement calls I have made as a pundit, including giving a qualified thumbs-up to the KWM/SJ Berwin tie-up three years back and initially taking a jaded view of Herbert Smith’s merger with Freehills, which proved far more successful. The longer you do this, the more you need to keep challenging your prejudices with the facts as they come in. Well, you do if you want to avoid spouting nonsense.
That is not to whitewash KWM. As best I can tell its problems were considerably more systemic and foreseeable than Halliwells, and there will be time to delve into the events leading up to the collapse and find those teachable moments. Neither am I massively sentimental about the old SJ Berwin. It had admirable qualities and its collapse is to be regretted but it was always a pretty hard-edged environment, not the mecca of entrepreneurial group-hugging some old hands now remember.
So as we settle ourselves into what promises to be yet another turbulent and eventful year for City law, let us keep the schadenfreude on a leash and remember there are no angels here, only interests.