Montreal-outbound law firm Ogilvy Renault LLP threw down the gauntlet first by throwing in its lot with UK-outbound law firm Norton Rose Group. The March 2011 Last Word, Who’s Next? (Lexpert), is about the consequences for the Canadian legalscape of that bold move.
Excerpt that says it all (full text follows):
…if the late ’90s taught us anything it’s that law firm mergers are rarely logical. Lawyers, ruthless, pitiless and relentlessly logical when pursuing a file or goal for a client, are rarely able to apply the same discipline to the future of their own shops. Sentimentality obtrudes, emotionality seeps in, and ego rules.
Photo by Doug88888
LAST WORD: Who’s next?
It’s not the only thing we’re talking about, but boy oh boy, when we’re not talking about it, we’re thinking about it. You know what it is, of course—today, the phrase “Who’s next?” requires no context. When we say it, when we think it, we mean one thing: if our inaugural Canadian deal means global law firm merger season has finally arrived in Canada, which firm is next? And with what partner?
There’s a bit of deja vu involved—back in 1998/2000, when the domestic merger dances peaked, it’s all we were talking and thinking about too, and those who weren’t dancing in earnest were constantly second-guessing and revisiting their decision to not dance. Looking back with the 20/20 hindsight of a decade’s worth of insight, the mergers that were and weren’t have been successful as often as they have achieved, to borrow a favourite oxymoron from one of my least favourite public figures, “an incomplete success.”
I’ve long posited that the real significance of the mergers and their flipside, the aggressive greenfields in key Canadian markets, was the creation of a platform that made Canadian law firms attractive as targets in the next—the real—wave of international merges. Although, let’s face it, merger is a kind, but wholly inappropriate, euphemism. Ogilvy Renault did not merge with Norton Rose: it was acquired.
Who will be next?
We don’t know. We’d like to act like we know, of course—like we have some inside track on the strategies and aspirations of everyone in the market—but, at best, all we’re making is more or less uneducated guesses. Really, our odds of predicting the next merger correctly (we’re not all agreed that they are coming en masse, but most of us are fairly certain at least one more should occur soon) are about as good as putting the names of all available Canadian law firms in one hat, those of shopping global or US firms in another hat, and pulling a name from each.
This is because if 1998/2000 taught us anything it’s that law firm mergers (and non-mergers) are rarely logical. Lawyers, ruthless, pitiless and relentlessly logical when pursuing a file or goal for a client, are rarely able to apply the same discipline to the future of their own shops. Sentimentality obtrudes, emotionality seeps in, and ego rules.
It’s ego that wrecks the most havoc on our predictions. Each one of us has a list of the same two to four obvious candidates: the firms that we, in our infinite speculative wisdom, would buy if we were a shopping global firm with an appetite for Canadian offices. Pause here to make your own educated guess as to which two to four we mean—yeah, those would be the ones. Two if you’re really picky, four if you’ve got more reasonable expectations. What we’re interested in—what we would be interested in if we were a shopping global law firm—is a strong platform in Calgary, a strong platform in Toronto, everything’s else icing. For some of us, Toronto is more important, for others (me!) Calgary critical, but we all agree those are the two markets in which our targets need to have traction.
But—and here’s where we get ground down and our speculation goes uber-speculative—we’re pretty sure that those two to four top pick targets won’t bite. We just don’t think that they’re… how can would put this delicately… scared badly enough. They’ve still got ego. Delusions. They would balk at an acquisition. They would seek a merger of equals. They would fight to maintain parity—or at least significant representation—in management. They would… walk, unable to surrender ego, authority, autonomy.
They would think they could do better—with someone else, or on their own.
For all we know, they already have thought so—and said so to a UK or US suitor. Emboldened, perhaps, by the proportion of their in-bound work that already comes from a variety of global law firms. Why would they risk losing that to be part of one bigger, scarier unknown? (Come to think of it, how does that chunk of in-bound work figure into the suitors’ calculations? Are they ruthless enough to include the calculation of its loss in the offer? Or hopeful enough to think they will fully replace it?)
So, who’s next? Not the obvious suspects, no. Go down the list a bit and look for someone sufficiently scared, sufficiently hurt—or at least sufficiently aware of their vulnerability—to surrender ego and autonomy. They won’t be their suitors first choice—or third choice, for that matter. And the suitor will make that known, because we think global law firms are just a tad more ruthless in these types of deals than Canadian law firms. And the Canadian law firm will take it, because they’ll need to. It’ll be a question of survival.
That’s what we say to each other, anyway, when we’re feeling particularly sagacious—and at the same time insecure about our future and viability in Globalization 3.0. When we’re more full of liquid courage—or when the indices are up, the house market is booming, and everyone wants a piece of us—we’re more pugnacious and think our firms—at least some of our firms—will hold their own. Find different paths to global relevance, diverse survive-and-thrive strategies.
But pugnacious or frightened, we’ve got one thing on our minds.
Marzena Czarnecka ponders the future of the Canadian legal universe from Calgary.