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John Coleman,managing partner at law firm Ogilvy Renault

Fred Lum/Fred Lum/The Globe and Mail

It's a move that has shaken up Canada's legal profession. And John Coleman, the managing partner of Ogilvy Renault LLP, acknowledges some soul-searching was required before deciding to merge his iconic Montreal-based national law firm with British international giant Norton Rose.

"Was there a moment, a 'walk in the snow'?" Mr. Coleman said in a phone interview, referring to former prime minister Pierre Trudeau's life-changing decision to retire after a midnight walk during a snowstorm. "There were nights when you question whether it's the right thing at 2 o'clock in the morning."

The merger, which will take effect in June, will see Ogilvy and its 450 Canadian lawyers switch to the Norton Rose brand, becoming part of a global network of about 2,500 lawyers. The new Norton Rose will become one of top 10 law firms in the world by size.

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It's a precedent for what some say could be more mergers between Canadian firms looking for a global presence and international legal giants based in the United States or Britain.

Some of those global firms, created in a wave of consolidation in the 1990s, keep getting bigger: Just last week, U.S.-based DLA Piper merged with its Australian associate firm, DLA Phillips Fox, to become the world's biggest law firm, with more than 4,000 lawyers.

But other Canadian managing partners insist their law firms can still compete internationally on their own, focusing on niche areas such as mining or energy, and creating a global network by opening their own offices overseas.

Bay Street's legal business is watching Ogilvy's move closely. There have long been rumours that major international players have been contacting Canada's law firms - Norton Rose has acknowledged talking to others before signing up Ogilvy.

Now some say that with the world's eyes on Canada's resilient economy, stable banking system and abundant natural resources, other international law firms may be looking to set up shop here.

Mr. Coleman, who is meeting this week with other Norton Rose international managing partners in Cape Town, South Africa. said he is not surprised that his firm's move, announced in November, has his competitors talking.

He denied that the decision came as a response to competitive pressure from Bay Street rivals in Ogilvy's Montreal home market. He says his clients - which include Bombardier Inc. and SNC-Lavalin - are world-straddling corporations and can be better served by a global firm.

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While the rest of the world is showing an increasing interest in investing in Canada, globalization has mostly spared Canadian law firms. International mega-firms have had almost no significant presence in the Canadian legal market - until now.

"We're the last business, even probably the last profession, to go global," Mr. Coleman said.

But there is another way, some managing partners say.

Hugh MacKinnon, the managing partner of Bennett Jones LLP, says his firm plans to remain independent and seek global business on its own, rather than as part of an international giant. Bennett Jones recently opened an office in Dubai to serve the United Arab Emirates and the entire region.

While size can help a law firm, it can also be a drawback, Mr. MacKinnon said. Canadian firms benefit from good relationships with law firms around the world, which refer work to them. Those referrals might dry up if those international or U.S. firms are asked to outsource work to the Canadian arm of a globe-straddling competitor instead.

As well, staying Canadian allows a law firm to focus on its niche and benefit from its own brand, Mr. MacKinnon said: "When we're in the UAE, we're a Canadian law firm. We're Bennett Jones. We're not an English firm or whatever. The advantage for us is we can keep it focused on what we want right now, what we need right now, and under a Canadian banner."

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Mergers can also be risky, said Michael Taylor, a British lawyer and a former Norton Rose partner now with the London office of Canadian firm Gowling Lafleur Henderson LLP.

Mr. Taylor, who started Norton Rose's Italian office, said integrating an existing firm into an international one is sometimes harder than simply starting a new firm from scratch. There can be problems, especially if the cultures of the two offices clash, he said, and cited the unwinding of a merger between Norton Rose and a firm based in Cologne, Germany, in 2004.

Britain's top-tier firms (the so-called Magic Circle) have recently pulled back from opening offices around the world, he said, mainly because many such branches turn out to be less profitable than first believed.

"There has been a trend among the bigger U.K. firms … to pull back from what they see as rather peripheral locations," Mr. Taylor said. "It's driven by profitability."

(Ogilvy's merger with Norton Rose involves a so-called Swiss Verein structure that will see Ogilvy keep its own profit and not yet share in Norton Rose's international profit. Full financial integration is planned down the road, the firm says.)

One factor making Canadian firms attractive to international outfits is the strong Canadian dollar, said Andrew Kent, chief executive office of McMillan LLP, who presided over the recent merger of his firm and Lang Michener, a move that gives his firm its own Hong Kong office.

"Parity with the [U.S.]dollar changes the economics of Canadian law firms," he said. "When the Canadian dollar was at 60 cents, Canadian law firms looked pretty poor by international standards. At par … the gap between us and a London firm is a bit smaller than it was."

Canada's major law firms are clearly watching Ogilvy's move very closely. If it pays off, others may follow, Mr. Kent said. "I think a lot of people will watch it to see how it goes, to try to assess whether it's the wave of the future, or a one-off," he said. "I think a lot of people are trying to get their heads around it."

Scott Jolliffe, chairman and chief executive officer of Gowlings, said his firm, already large by Canadian standards with more than 700 lawyers, has no plans to tie the knot with an international partner. It prefers to focus on its strengths - energy and intellectual property - and open its own offices around the world.

Gowlings has had an office in Moscow for a quarter-century. In addition to its newly beefed-up London practice, it will have an office in Beijing later this year.

Mr. Jolliffe argued that Canadian firms need to go global - one way or another - because economic growth elsewhere in the world is moving at such a quick clip. "The Canadian market for legal services is relatively stagnant," he said. "It's saturated."

So Canadian firms need to figure out how to get a piece of the global action, and there are really just two available strategies: Go big, with an international firm, or go it alone.

"Some firms, such as Ogilvy Renault, have chose to become part of somebody else's empire," Mr. Jolliffe said. "Another way to do it, though, is to grow on your own. And that's the way we've chosen."



Top five global law firms by size

1. DLA Piper (U.S.): 4,000 lawyers*

2. Baker & McKenzie (U.S.): 3,774

3. Clifford Chance (Britain): 2,586

4. Jones Day (U.S.): 2,530

5. Norton Rose (Britain): 2,500*

Top five global law firms by revenue (U.S.$)

1. Baker & McKenzie (U.S.): $2.104-billion

2. Skadden Arps Slate Meagher & Flom (U.S.): $2.1-billion

3. Clifford Chance (Britain): $1.875-billion

4. Linklaters (Britain): $1.853-billion

5. Latham & Watkins (U.S.): $1.821-billion

*Approximate size once planned mergers take effect this year.

Source: American Lawyer

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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