Woke up this morning – Australia time – to news that had broken overnight that Eversheds Sutherland (ES) and King Wood Mallesons (KWM) had entered into an exclusive alliance, along with a whole lot of DMs (Direct Messages) in my LinkedIn box asked me what my initial thoughts were.

So here I go with some initial, off the cuff, thoughts about this:

• With the closure of the 6 KWM offices across the UK, Europe and Middle East, the deal likely brings to a happy end KWM’s sad foray into those markets and puts final closure on the SJ Berwin story.
• Both KWM Australia and KWM Hong Kong are not part of the deal. While this is good news for ES’s Hong Kong team – who I hold in very high regard – it seems very odd and shows possible cracks in the Swiss Verin model that is KWM (with KWM China being party to this arrangement). I’ll be very interested to see what this means for KWM Australia in particular.
• The arrangement requires – subject to “client preference and conflict clearance” – KWM China to refer all outbound UK, Europe, Middle East, Africa and South America instructions to ES. I understand the “UK, Europe and Middle East”, but why include “Africa and South America” (noting that ES has offices in Africa but not South America that I can tell)? I think this could be particularly telling given both Africa and South America will be geographies in which KWM Australia plays and so there is the potential to see KWM Australia pitching for work against work that ES has been referred from KWM China.
• Noting the deal is with “Eversheds International”, there is no mention of whether the consultancy arm of Eversheds is included in the arrangement. If it is, then KWM China has boosted it offering in this space significantly overnight (although there may well be some regulatory restrictions around that [consultancy] in China).

To me though, what will likely make or break this “formal cooperation agreement” however will be:

• How are inbound/outbound referrals being tracked?
• How are the referring partners being rewarded for the referrals?
• And, what will the KWM Australia partners make of all this given access to a network of lawyers in one of their biggest overseas geographic locations, the UK, will be gone? Do they refer work to ES, even though they are not part of the deal? Or do they refer work to lawyers/mates in other law firms who compete with ES in the UK – including, interestingly US firms with news earlier this week that: “Nearly half of the UK’s largest law firms are US-headquartered”.

I guess we will have to wait and watch this space, but my three big observations are:

(1) Not sure what Eversheds is getting out of this deal – do KWM China refer that much work into UK, EMEA and South America?

(2) Looks to be a great deal for KWM China.

(3) Are KWM Australia being left in the wilderness?

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