National Post Articles
Law firms seek growth in the U.S.
Jim Middlemiss, Financial Post • Wednesday, Nov. 3, 2010
While Canadian law firms like Fasken Martineau DuMoulin, Blake, Cassels & Graydon and Macleod Dixon are busy expanding into countries like France, Saudi Arabia, China, Britain, South Africa, Colombia and Brazil, others are sticking closer to home.
The reality is that the United States is still Canada's biggest trading partner by far and there's no one on the horizon to eclipse that anytime soon.
So it shouldn't surprise anyone that Osler, Hoskin & Harcourt has now quietly built its Manhattan office up to 28 lawyers, just shy of the 31 lawyers at Torys in New York.
Randall Pratt, managing partner of the U.S. office, noted that his firm has long had a presence south of the border, but the original focus was to operate as a representative office, with a handful of Canadian lawyers chasing down inbound work to Canada.
Now, the focus is servicing Canadian companies that need help navigating U.S. capital markets, understanding laws like ERISA (the Employee Retirement Income Security Act), and servicing U.S.-based companies looking to do cross-border deals with Canadian firms.
As U.S. corporate partner Rob Lando put it, the firm works with "U. S.-based clients with cross-border needs."
Mr. Pratt said that Manhattan is a "tough marketplace and you need to be committed to it." However, he said, the cross-border activity is increasing and the U.S. market is "enormous." It is also "fragmented," which he said presents Oslers with an "opportunity for us to grow our practice in this space."
While Oslers is one of the biggest law firms in Canada and is involved in some of the largest deals here, Mr. Pratt is under no illusion that the firm will one day compete with Skadden Arpps or Weil Gotshal for the top U.S. deals.
However, in an interview from his firm's boardroom overlooking midtown Manhattan, Mr. Pratt said that U.S. mid-sized deals stack up with Canadian deals anytime.
The firm also treads carefully building its U.S.-based clientele so that it doesn't bite into the referral network of deals the Canadian offices get from U.S.-based law firms.
"The referral thing is something we need to be cognizant of and manage," Mr. Pratt said.
Kevin Cramer, a corporate partner in New York, said having a U.S. office makes sense for a national Canadian law firm because it allows "seamless" service to companies that want to do business in the United States. "To do that under one firm is a competitive advantage."
So Oslers has slowly been growing the New York office one lawyer at a time -- the same way it has built its national presence, eschewing mergers. "You need to build a critical mass of lawyers," Mr. Pratt said, adding that "we have got the complement of lawyers we need to serve the business we are doing." Now he's filling gaps and adding expertise to build out the business.
Infrastructure lawyer David Spencer recently joined the New York office from international law firm Steptoe & Johnson. Mr. Spencer said there's an infrastructure deficit in the United States and he thinks it is only a matter of time before state and municipal governments start using the public-private partnership model to address it. Mr. Spencer said there are energy and transportation projects that "need to get built and need financing." He said he was attracted to Oslers because it has an "international view."
Mr. Pratt said oddly the U.S. is "light years behind every other country in privatizing public infrastructure. Canada has moved way ahead of the U.S. The thinking is P3 is coming to the U.S. and I think it's going to come in a rush."
Oslers isn't the only Canadian firm putting U.S. lawyers to work. In a legal market that has seen layoffs and hiring come to a standstill, Torys has also been hiring of late, New York managing partner Phil Brown said. Torys added two new associates to its New York office in October. Mr. Brown said the tepid U.S. legal market has provided the firm an opportunity to "fill the gap" and the quality of associates that apply to the firm has risen as the job market there stagnates.
Mr. Brown thinks the optimal size for the U.S. office of a Canadian firm is in the 30-lawyer range and his firm has been refocusing its U.S. practice over the past few years. After his firm's 2000 merger with Haythe & Curley, the firm had about 75 lawyers. Now it no longer does environmental or health law, but rather focuses on corporate law and commercial litigation, the bread and butter of its Canadian practice.
David Wawro, a New York litigation partner who came over in the merger, said one of the firm's strengths is the number of "dual-qualified lawyers" -- those who are licensed to practise in both Ontario and New York. He said at anytime the New York office can tap into 50 or more U.S. qualified lawyers on both sides of the border. "That's a differentiator."
Both firms remain bullish on the U.S. despite the sluggish economy there. Mr. Brown noted Canadian pension funds are taking advantage of the low valuations to buy up assets. Moreover, unlike Canada, the initial public offering market is still alive and breathing. Mr. Brown noted his firm recently acted on five IPOs and said he believes that market will continue to grow in the coming years as private equity firms look for an exit strategy for their current portfolio of business, which they may have been holding for some time now.
So while Europe and Asia beckon for some law firms, for others it is still hard to ignore our neighbour to the south.
As Steve Richman, a lawyer at the U.S. law firm Duane Morris, who chairs the Canada-American Chamber of Commerce Mid-Atlantic association, said Canada is still the largest trading partner with the U.S. His organization promotes business between Canada and states such as New Jersey, eastern Pennsylvania, Delaware and Maryland.
According to website ustradenumbers.com,Canada accounts for US$345-billion in trade with the U.S., well ahead of China's US$285-billion year-to-date. Yet trade with China and Mexico is rebounding quicker than Canada. Almost all the U.S. customs districts report an increase in trade over 2009, the "worst year for global trade in modern times," according to the website. Maybe now is the time for more Canadian law firms to seize the opportunity. Legal talent is plentiful in the U.S., the dollar is on par and vacancy rates are high. It's never been a better time to invest in a foreign office south of the border.
Rumblings on the street are that law firms McMillan and Lang Michener are close to a merger. Apparently partners have been meeting to iron out the details.
Tim Murphy, a partner at McMillan, said "we never comment on rumours. Of course, we are always looking to strengthen our firm and serve our clients better."
Lang Michener managing partner Robert Cranston did not respond to requests for comment.
Such a merger would be complementary and create a truly national law firm. Each firm has about 200 lawyers. McMillan has offices in Toronto, Calgary and Montreal, while Lang has offices in Toronto, Ottawa and Vancouver. It also recently opened a representative office in Hong Kong. Lang's Vancouver office, which has 83 lawyers, is one of the biggest in the city.
Overall, a merger would lift the firm into the top 10 in terms of size at around 400 lawyers, about the same as Ogilvy Renault. The Toronto offices are both in Brookfield Place, so it wouldn't be a case of having to find new space in Toronto for a single office.
McMillan -- formerly a Toronto regional firm known as McMillan Binch -- has been building out its offices, merging in 2005 with the Mendelsohn law firm in Montreal. It then merged with most of the Calgary office of Thackray Burgess in May 2009. (Patrick Burgess moved his practice to Gowlings.) The firm dates back to 1903, but really took off under Gordon McMillan, who joined the firm in 1921, and a hard-driving junior partner named Bill Binch. In the 1940s and 1950s Mr. Binch drove his Oldsmobile from Toronto to Chicago, soliciting the Canadian legal work from mid-sized U.S. companies that were expanding into Canada.
Like McMillan, Lang Michener is an old stalwart, and was once home to former Prime Minister Jean Chretien. Former governor-general and speaker of the House Roland Michener founded the firm in 1926 with Daniel Lang, a member of the Senate Committee on Banking, Trade and Commerce. It was one of the first law firms to open a Bay Street office. In 1989 it merged with the Lawrence and Shaw law firm in Vancouver to become one of the first law firms with offices in more than one province.
The firms have a number of overlapping practices, but each also boasts some skill sets that the other firm lacks