Competition and change: The Canadian legal landscape

In keeping with a competitive international market for legal services, law firms in Canada are fighting hard for coveted places in the top tier. Sandy Rubin reports.

When anyone asks about the Canadian legal market they invariably mean Toronto. Canada’s markets are dictated by its geography, with national law firms having offices hundreds or thousands of miles apart. Calgary, the hub of the oil patch, and Montreal, home to some of the country’s most important corporations, are the senior regional markets but as the heart of the country’s financial industry, Toronto rules.

The city has 21 firms battling for high-end deal work. But the landscape is dominated by the seven sisters, the tier-one firms known for their depth of corporate talent and presence at the table on virtually every deal of note.

Blake Cassels & Graydon LLP, Davies Ward Phillips & Vineberg LLP, Goodmans LLP, McCarthy Tétrault LLP, Osler Hoskin & Harcourt LLP, Stikeman Elliott LLP and Torys LLP make up the inner circle. The listing is alphabetical, and not by accident. Like true sisters, there is a strong streak of rivalry between Canada’s senior law firms and they keep a close eye on one another.

Challengers also abound among the senior tier-two players hoping to knock tier one firms out. Fasken Martineau LLP, Fraser Milner Casgrain LLP and Borden Ladner Gervais LLP, all large national firms capable of handling high-end corporate work, are not prepared to cede the fight, while Ogilvy Renault, a historic Montreal firm, also has its eye squarely on Toronto’s top ranks. Bennett Jones, an old Calgary firm, has similarly been raising eyebrows with some high-profile lateral recruiting in its rebuilt Toronto office, including Alan Bell, a top-ranked M&A practitioner and Richard Orzy, a tier-one restructuring practitioner.

With all the jousting for premium position, things can get bumpy. Some legal strategists doubt there will be enough top-end work a decade from now to sustain even seven tier-one Canadian firms, and there is speculation that a merger among the top ranks is inevitable.

Driving the stakes ever higher is concern that as the Canadian and US economies become more closely intertwined, some corporate work may migrate south.

Each of the seven sisters is supremely capable of handling complex deal work and litigation, and most have at least a rep office in New York for cross-border work. So how they differentiate themselves is critical to winning the talent wars and growing market share.

For Osler Hoskin & Harcourt, a powerhouse in M&A and corporate finance, its dominant corporate tax group is a defining feature. It’s a formidable combination and the firm has some serious talent starting with co-chair Clay Horner, recognised in Who’s Who Legal as Canada’s leading M&A lawyer.

The firm was counsel to Adolph Coors Company on its merger with Molson Inc., a storied Canadian beer maker. The C$7.7bn transaction was not just large but complex – involving two control-group families and two dual-share capital structures.

Like Oslers, McCarthy Tétrault, which acted for long-term client Molson, considers the Molson-Coors deal its signature transaction. It was the largest cross-border deal in North America in 2004 and involved significant cross-border tax issues and complex shareholder negotiations.

McCarthys, Canada’s largest law firm with over 750 lawyers, has a dominant Toronto office but uses its offices in Calgary, Vancouver and Montreal to offer one-stop shopping on inbound US and international work.

Stikeman Elliott is unusual in that its offices in Montreal and Toronto are viewed as equally strong. While the Vancouver office does not play at the same level, the firm has made some important corporate acquisitions in Calgary, adding David Robottom and Craig Story.

With strong M&A players such as William Braithwaite in Toronto and Pierre Raymond in Montreal, Stikemans scoops up its share of domestic deals but also international work, particularly in Europe and Asia, with the help of small offices in Hong Kong, Sydney, New York and London.

Blake Cassels & Graydon, too, is frequently identified by a longstanding senior relationship – with the Canadian Imperial Bank of Commerce, which it helped incorporate more than a century ago.

More recently, under senior banking practitioner Jim Christie, Blakes has beefed up key practice areas, assembling a particularly strong competition group in Canada centred on Cal Goldman, a superstar in competition law, and Neil Finkelstein, the dominant competition litigator.

Blakes opened an office in Montreal a little under five years ago. It also has a strong presence in Calgary, and has been among the most successful of all the nationals that have gone into the oil patch.

When it comes to strength pound for pound, for two decades Davies Ward Phillips & Vineberg was considered unequalled – partly a testament to its key practice groups, and partly to the reputation of its lead M&A practitioner, J-P. Bisnaire. Bisnaire left last year to become executive vice-president of Manulife Financial, leaving people wondering how Davies would fare.

To shore things up, the firm reached into the ranks of senior investment bankers and repatriated William Gula from Scotia Capital Inc., the investment banking arm of Scotiabank, where he was managing director and head of M&A.

Like Stikemans, Davies has a top-tier corporate presence in both Toronto and Montreal. It adheres to a strategy of small and sophisticated and is known for top-end transactional work for large international clients.

When you talk about differentiation, Torys has taken the most dramatic route. The firm has ignored Canadian markets outside Toronto and gambled on a north-south strategy, merging with a little-known New York firm in late 1999 and emphasising seamless cross-border service.

Torys has always had sterling relationships in corporate Canada with a stalwart M&A group under Peter Jewett. But it’s the cross-border strategy and the decision to practice US law – risking a drop in cross-border referrals – that has become its trademark, and led to it winning US transactional work from traditional firm clients such as Thomson Corp. and non-traditional clients such as Petro-Canada.

Goodmans, the smallest and most entrepreneurial of the seven sisters, doesn’t have a big bank in its stable and has tailored its strategy accordingly. With M&A practitioners Stephen Halperin and Dale Lastman, the firm has a strong corporate team that represents high-end made-in-Canada businesses. It also still has one of the strongest insolvency groups in the country, despite recently losing Geoffrey Morawetz, one of the firm’s two star practitioners, to the bench.

The future

There is one thing the senior strategists at most law firms agree upon: the high-end Canadian legal market will not look the same in five years as it does right now. Structural change appears inevitable, whether through domestic mergers or joining with a large international player. Either way, the bets being placed on strategy today will tell the tale of tomorrow’s fortunes.