The demise of two long-standing law firms within six months of each other has sent tremors through the legal market and raised questions about the ability of Canadian mid-market and regional law firms to survive.

In March, the 90-lawyer firm Goodman and Carr LLP in Toronto voted to dissolve its partnership, and the lawyers dispersed to various firms, with a core group landing at Fraser Milner Casgrain LLP. That was followed by Desjardins Ducharme LLP’s announcement this month that it would close, with 35 of its Montreal corporate commercial lawyers moving their business to Lavery, de Billy LLP and the Quebec office reverting back to its old moniker Stein Monast LLP, the name it held before it merging with Desjardins in 1992.

The developments have prompted many law firms to evaluate the glue that binds them.

“We chose to go through a strategic planning process and a reflection of why it is that we practise here in reaction to what happened with Goodman and Carr,” says Jeffrey Cohen, managing partner of Torkin Manes Cohen Arbus LLP, a 75-lawyer firm in Toronto.

Mario Charpentier, co-managing partner of BCF LLP, a Quebec business law firm with 110 lawyers between its Montreal and Quebec City offices, notes, “We are now in a very, very competitive industry. There is a lot of work to do in this market, but you have to stay on your toes.”

So what does it take for mid-sized firms to survive? For Mr. Cohen, the starting point is “the shared values” that make up such firms. However, even more important is developing a clear sense of who the firm’s clients are and who they are not.

He notes the “major financial institutions and the banks have culled their lists and are staying with the big national firms. We can’t compete for that work. We don’t want to compete for that work.”

Rather, “we understand that we are servicing the owner-operator type client, and we believe that type of client wants to do all its business at our office,” says Mr. Cohen. “They want to buy their house with us [and] do their will with us. Those practice areas are not our bread and butter, but we recognize we need to provide those services.”

Mr. Charpentier says BCF is a “business law firm that serves Quebec entrepreneurs and we are focused on technology and growth enterprises.” The firm also represents large companies and institutions in “our areas of niche expertise in taxation, intellectual property and international arbitration.”

“A firm has to focus on specific markets and distinguish itself in them,” says Mr. Charpentier. “If you try to do something where you are not one of the best in the field, you may get into trouble.”

At Field LLP, with 92 lawyers in Edmonton, Calgary and Yellowknife, the client base is different, but equally well- defined.

“If there is a defining characteristic at all in our client base, it is that they have Alberta roots,” says Robert Teskey, Q.C., Field’s managing partner. “[We] have been able to appeal to them as a firm that has a similar focus to theirs. They are often leaders in the Alberta market, and would not define themselves as mid-market businesses, but their tentacles do not go further than the province.”

The exception to this rule is Field’s insurance practice, which features national and international insurers as clients. “There, we have defined ourselves with our clients as being a market leader in insurance law in Alberta,” says Mr. Teskey.

Even then, having a focused niche is no guarantee of success. A steady exodus of talent preceded the dissolution of both Desjardins Ducharme and Goodman and Carr, so firms must also retain their lawyers, at a time when competition for bodies is fierce. “When you strip everything away, the real problem tends to be that they were losing good people, not because they were necessarily doing something wrong, but simply because people perceived they had better opportunities some place else,” says Mr. Teskey. “Mid-market law firms are always vulnerable because we typically have very good lawyers who are targeted by our bigger competition.”

“The challenge for those of us in the mid-market is to define ourselves sufficiently well that our lawyers feel comfortable that they are achieving their full potential in our environment.”

“If you are simply perceived … as being in the middle of the pack it is very difficult to hold on to your very best people.”

It can also make it difficult to recruit others. “The bulk of people who are going to come to a firm like ours made the decision they don’t want to go to a 500-lawyer law firm,” adds Mr. Cohen. “But we don’t want them to join us just because they think it’s a lifestyle decision. As we recruit, we need to assure them that we are as good lawyers as any in the city.”

“The quality of the files we are working on are as good as the bigger firms are doing. Granted they may not be as large or complicated, but a good piece of sophisticated commercial litigation is a good piece of sophisticated commercial litigation. A $50- million transaction is not that different from a $150-million transaction.”

Mr. Charpentier adds, “it’s not about size. It’s about culture, attitude, leadership, the ability to attract and keep talent, and above all having a great vision.”

“Success as a firm today means you have to have the capacity to adapt to a changing environment. [It’s] not the big that beats the small in today’s market. It’s the fast that beats the slow.”

Credit: Financial Post

(Copyright National Post 2007)