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The history of Canada's top law firms: Big fish in a small pond
By Christopher Guly

July 01 2011 issue


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Part 1 of a 3-part series on Canada's big law firms

See part 2 on the Canada's big law firms weathering the recession here

See part 3 on the world looking to Canada's big law firms here

A catchy moniker, coined over a decade ago, defined the A-list of Canadian law firms for the better part of the last decade.

Seven Bay Street firms — Blake, Cassels & Graydon LLP, Davies Ward Phillips & Vineberg LLP, Goodmans LLP, McCarthy Tétrault LLP, Osler, Hoskin & Harcourt LLP, Stikeman Elliott LLP and Torys LLP — were dubbed the Seven Sisters around the turn of the millenium.

“On law school campuses, an offer from a Seven Sisters firm was seen as more valuable than from a firm doing comparable work outside the Seven Sisters,” explains Tim Leishman, who left his law practice in 1997 to co-found a professional services consultancy firm, now known as Firm Leader.

Leishman adds that the same held true for lateral recruiting in which the Sisters had the advantage of attracting leading lawyers from other firms.

He says the designation “wasn’t fair in many respects,” since it overlooked other top guns, such as Ogilvy Renault LLP and Borden Ladner Gervais (BLG) LLP, whose core practices (health law and mutual funds work in the case of BLG) were not included in the criteria for Seven Sisters recognition.

“It was a tough characterization to break out from for firms outside of that group.”

However, Leishman believes that over time, the Seven Sisters designation has been “fading” as a new paradigm, based on size and reach, replaces it.

By the numbers, BLG, Gowling Lafleur Henderson LLP and Fasken Martineau DuMoulin LLP each have more than 700 lawyers and comprise Canada’s top three firms by head count.

All would be considered big on a national basis if they were based in the U.S., whose population is nine times larger than Canada’s, says Ward Bower, a principal of U.S. legal consulting firm, Altman Weil Inc.

“It’s surprising the Canadian firms are able to operate at that size without conflicts of interest problems every time they turn around since they represent so many clients,” he says, pointing out that Australia, which has a population about 1.5 times smaller than Canada, has firms much larger in size with 1,000 or more lawyers.

Bower explains that the size of large Canadian firms may be on par with those in the United States, in part, because those on this side of the border “go deeper into the market” and do more commodity-related work, and therefore require a greater roster of lawyers.

The other reason is tied to the 1989 Supreme Court decision in Black v. Law Society of Alberta [1989] S.C.J. No. 27, which enabled the establishment of McCarthys and laid the foundation for national law firms in Canada. Most of the big ones were assembled through interprovincial mergers, which brought together existing clients onto a national platform, says Bower, who has facilitated some of the world’s largest law firm mergers, including DLA Piper. “Those provincial client bases may have included more middle-market work and a firm would have grown by way of geographic expansion by relocating lawyers.”

Now, firms are growing by looking further afield — at least in the case of Ogilvy Renault LLP, which joined the U.K.-headquartered Norton Rose Group on June 1. Now known as Norton Rose OR LLP, Ogilvy Renault LLP, with about 450 lawyers, is part of a network of more than 2,600 lawyers in 38 offices around the world and among the top 10 legal practices on the planet.

“That’s a major development in the marketplace that’s never happened before on this scale,” says Ottawa lawyer Jordan Furlong, a partner with law-firm consultancy, Edge International, who also runs the Law21.ca blog. “That’s a truly global firm coming into Canada.”

He explains that following Baker & McKenzie coming into Canada in 1962, other American firms such as Dorsey & Whitney LLP, Shearman & Sterling LLP and most recently Paul Weiss Rifkind Wharton & Garrison LLP, have crossed the border to set up offices in Toronto.
While the Ogilvy Renault-Norton Rose international partnership is unprecedented in Canada, it could also set a new standard for the way firms conduct business in this country, argues Furlong.

“Norton Rose is very candid about its financials, and no other Canadian firm does anything similar to that.”

(Under Norton Rose Group’s Swiss Verein legal structure, its Canadian and other components operate independently without financial integration and with limited liability.)

Furlong also points out that Norton Rose “cut its teeth” in the extremely competitive markets of London and New York and expects that it will bring that same competitiveness to Canada.

The British invasion could continue.

On a smaller scale, U.K.-based insurance specialist firm Clyde & Co. has reportedly held discussions with Nicholl Paskell-Mede, an insurance and liability defence boutique with offices in Toronto and Montreal.

On a larger scale, British powerhouse DLA Piper — the world’s biggest firm with more than 4,000 lawyers and itself the result of a merger between U.S. and British firms — is reported to have courted Fasken in 2008. More recently, it is in merger discussions with some of Canada’s top 10 firms, including Heenan Blaikie and Fraser Milner Casgrain, both of which have offices in energy-hub Calgary, according to The Lawyer in the U.K.

“This says that the world is moving into the Canadian marketplace,” says Furlong.

Norton Rose Group has “cracked the marketplace wide open” for such other global players as DLA Piper, who are rumoured to pursue alliances with Canadian firms having strong practices in the natural resources and oil and gas sectors, says law firm consultant Michael Short, a managing director at professional services firm management consultancy, Hildebrandt Baker Robbins in Washington, D.C.

“If a major international firm ever does a deal with global connections based on energy and natural resources, it’s going to redefine the community of big players in Canada,” he says. “It remains to be seen if the current big players will find it necessary to do one of these transactions.”

“But if a national firm, not in the Seven Sisters, is trying to create a stronger presence and has a good energy practice, this could be very interesting.”

Short expects to see one or two more Swiss Verein-type alliances formed in Canada and smaller outposts established here by top U.K. — or so-called magic circle — firms attempting to establish a foothold in these industry-led practice areas.

However, one Canadian firm is already doing so, without a merger.

Established in Calgary as Bennett, Hannah & Sanford in 1922, today’s Bennett Jones LLP’s energy and natural resources practice has followed the development of Alberta’s oil industry, which has helped give it a global presence in the energy marketplace. With a flurry of deal activity in oil and gas, electricity, power projects, mining and renewable fuels, the firm has been in “the right place at the right time,” says Short.

“It’s established itself in the marketplace and has become part of what I call the Eight Sisters.”

For its part, Ogilvy Renault, as Norton Rose OR, creates an entirely new category of law firms in Canada, according to Furlong. It can now expand its expertise in such practice areas as life sciences and build its client base, which includes the Royal Bank of Canada, Bombardier Inc. and SNC-Lavelin, through its new global network of lawyers to pursue other market opportunities.

“If Ogilvy can convince an international audience they have the resources of Norton Rose behind them, it may mean they end up getting deals they might not otherwise acquire if they were just doing it themselves,” says Leishman.

The challenge for other big Canadian firms will be competing with an expected “raft of global players” entering the market here while coping with more stringent client demands on pricing, says Furlong. “I don’t see any of the top Canadian firms pursuing a similar course as Ogilvy did.”

Leishman also does not see a flurry of activity occurring along the lines of a Norton Rose-type arrangement.

He points out that several Seven Sisters firms, such as Torys, Oslers and Davies, have established significant U.S. law practices in New York, and doubts they would fold into an international practice.

However, non-Seven Sisters big Canadian firms might consider a Swiss Verein or DLA-like merger to raise their stature in the global legal community.

“They could go from one of many big firms in Canada to being part of an even bigger firm in the world and get a much higher level of work,” says Leishman. He also does not expect to see much in the way of national mergers happening in the near future beyond the corporate nuptials earlier this year between McMillan LLP and Lang Michener LLP, and Toronto-based Miller Thomson LLP and Balfour Moss LLP of Saskatchewan.

A merger is also not in BLG’s immediate plans, says national managing partner Sean Weir, who does expect other large Canadian firms will consider Norton Rose-type arrangements.

He says that foreign suitors find Canada attractive because of its commodities and because the country’s banking and financial systems weathered the recent economic storm. But BLG is likely too big to enter into any formal global network, and is concentrating on informal relationships it has with a broad number of firms around the world.

“The defining issue for the growth of Norton Rose-type arrangements will be law firms assessing what they will gain and what they will lose by doing something like this,” says Weir.


Firm profile: Borden Ladner Gervais LLP

Formed from a merger of five regional firms on March 1, 2000, Borden Ladner Gervais (BLG) LLP arrived on the national scene a year after seven other large firms were dubbed the “Seven Sisters.”

While not a sibling in that family, BLG is — a little more than a decade later — the Big Mamma of Canadian law firms. With about 760 lawyers at offices in Toronto, Ottawa, Montreal, Waterloo, Calgary and Vancouver, it is, by that head count, the country’s largest firm and the size of top firms in the U.S. However, BLG would not have come to be had it not been for one of the sisters, McCarthy Tétrault LLP, starting the merger trend when four regional firms got together and, after the Supreme Court of Canada (SCC) gave the go-ahead in the Black v. Law Society of Alberta [1989] S.C.J. No. 27, established Canada’s first national law firm.

The broader reach and multi-heads-are-better-than-one model inspired Howard, Mackie of Calgary, McMaster Gervais of Montreal, Scott & Aylen of Ottawa, Borden & Elliot of Toronto and Ladner Downs of Vancouver to come together, according to Sean Weir, who has served as national managing partner since BLG’s creation.

“We felt we could provide seamless service to clients across the country if we were a single firm as opposed to having agents in different provinces.”

However, he says that becoming Canada’s biggest law firm was never BLG’s goal.

“We wanted good practitioners with good clients, and had growth by winning new business.”

Still, the firm is not shy about promoting its top-of-the-heap status, and uses it as a “calling card” when searching for work internationally.

“It gives us a certain measure of respect,” explains Weir, who also practises corporate law focused on pension and financing matters. “Our size indicates stability, growth and continuity with clients.”

Lawyers from other firms seem to like those characteristics too.

“We’ve never had as many partners from other law firms looking to join BLG as we have over the last eight months,” says Weir, who started practising law in 1981 with Borden & Elliot. “Some firms may not have as broad a client base, may be more transactional in nature and may be having more issues with workflow than we are in today’s economy.”

Although the firm, like others, has experienced decreased volume in banking, acquisitions and securities transactions since the start of the economic crisis in October 2008, BLG’s broad-based practice (55 per cent of which is corporate work and 45 per cent from litigation or dispute resolution) has kept it financially strong. Having a stable institutional client base, composed of banks, insurance companies, hospitals, schools and governments has also served the firm well through the recession — particularly in Calgary, where the economy is thriving thanks in large part to the booming electricity sector and oil and gas industry.

Weir points out that BLG is experiencing growth in not only its energy practice, but also in its practice areas for public-private infrastructure projects, corporate commercial, securities and capital markets, mergers and acquisitions, class actions and commercial litigation.

“We’ve done better than most American firms, which have experienced a much more drastic reduction in deal flow over the last two years.”

He explains that large U.S. firms are built around significant deal flow and typically have three to five associates for every partner to keep business moving in and out the door. By comparison, major Canadian firms, such as BLG, usually only have one associate per partner.

“When the deal flow dries up in the States, there’s a huge amount of excess capacity very quickly,” says Weir, adding that the lesson for all law firms is to be “prudent in growth, understand where work comes from and not be overly aggressive hiring with the hope of becoming busy.”

He says that BLG is “unbelievably diligent” in only hiring senior lawyers as partners with “good practices” and expertise in “developing business,” and promotes associates who have been with the firm since their call to the Bar.

Check out the current top law firms in Canada, according to martindale.com, which is owned by LexisNexis Canada Inc., the publisher of The Lawyers Weekly: http://www.martindale.com/top-10-law-firm-lists/firm-visibility-country-canada.htm


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