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Ogilvys hopes global deal will be magnet for other firms’ partners

|Written By Julius Melnitzer

There are four key things we know about Ogilvy Renault LLP’s stunning announcement last week that it will be the first Canadian law firm to go global by joining the international legal practice known as the Norton Rose Group on June 1.

 

‘Canadian law firms may not disappear but they will follow our lead in some way,’ says Norman Steinberg.

First, the Norton Rose Group is structured on the Swiss Verein model, which means there’s no financial integration between its components.

Second, Norton Rose has no members in the United States, which continues Ogilvys’ long-standing reluctance to commit to any physical presence south of the border while instead favouring an international reach over a continental one.

Thirdly, Ogilvys has made it clear it regards its new alliance as a magnet for luring high-profile lateral moves from the rest of the domestic market.

Finally, at least one other Canadian firm approached by the international legal practice has no interest in a global arrangement at this time or, it seems, no desire to enter into a deal with Norton Rose.

As for the Verein model, it’s essentially a structure used by international accounting firms Deloitte and KPMG and international law firm Baker & McKenzie LLP.

Local partners are subject only to regulation in their own jurisdiction, and liability doesn’t cross borders, which protects the financial integrity of the international networks.

The structure appears to have worked well for the accounting firms, but there’s far less unanimity about how well it has suited Baker & McKenzie or jived with its goals.

Still, Stephen Parish, the Norton Rose Group’s chairman, lauds the Verein structure.

“The real beauty of the Verein is that we can deal with each member of the group individually and at the same time allow quality, unity, and integrity to bind us all,” he said. “This is as close a relationship as you can get without financial integration.”

Of course, that’s not to say that financial integration is out of the question. “There are huge issues, including currency and tax, that need to be addressed first,” Parish said. “But forget about financial integration because this is still a marriage in the real sense of the word.”

Both Ogilvys and Norton Rose play down the notion that the merger represents the first step in the hollowing out of Canada’s legal market.

“This is not a franchise operation or a one-way ticket,” Parish said. “As we discovered during our Australian merger, we have a lot to learn from the different ways in which law firms around the globe operate.”

Still, some people are wondering about the implications. A hindsight look at the development of the Canadian legal market reveals a certain tendency on the part of experts to predict that firms here won’t follow U.S. and British trends for various reasons.

A frequently mentioned factor is that Canada and its legal market are too small, for example. Market patterns here invariably follow the giants’ lead, however. It’s just that we take longer to get there.

Nevertheless, the United States is a definite target for Norton Rose. “We’re not quite there yet but we do envision a union with an American firm,” Parish said. “Our approach is to get other pieces of the jigsaw in place first.”

Historically, Ogilvys hasn’t necessarily been a trendsetter in the legal marketplace. It was the last of the large Montreal firms to move to Toronto; it only recently opened an office in Calgary; and it doesn’t have a branch in Vancouver.

The firm maintains its only foreign office by way of a small representative contingent in London, England.

At the same time, if the partners have ever seriously considered expanding in any way to the United States, it’s been a very well-kept secret. The emphasis has always been global, not continental or, until relatively recently, even national reach.

Still, Ogilvys is a trendsetter now.

“I predict that this announcement will create a lot of change in the legal landscape,” said Ogilvys’ chairman Norman Steinberg. “Canadian law firms may not disappear but they will follow our lead in some way.”

If Ogilvys has its way, however, those other firms will be following without some of their partners. “Norton Rose has been very successful in other jurisdictions in recruiting very high-quality partners who may not have joined the local firm without the international connection,” Steinberg said.

Toronto managing partner John West is quick to chime in on that issue. “Whenever we’ve had approaches from partners in other firms, the discussion inevitably turns to our international plan, so obviously we believe that the association with Norton Rose is an attractive recruitment prospect both on the partner and the university recruiting level,” he said.

Norton Rose did consider other Canadian firms, but Parish said Ogilvys was a “standout transaction” and an “incredible fit.” What is known is that Blake Cassels & Graydon LLP, one of the 10 Canadian firms larger than Ogilvys, declined after Norton Rose approached it, according to a senior partner.

Just how quickly others may follow Ogilvys remains to be seen. But one thing is clear: suddenly there’s a much more formidable contender in the Canadian legal market sweepstakes.

With the announcement that South Africa’s fourth-largest firm, Deneys Reitz, would join Norton Rose as well, the group becomes a top 10 global legal practice with 2,500 lawyers in 38 offices worldwide. It also puts the firm in the global top 20 for profitability.

For more on the last Bay Street mergers, see "Integration a challenge for McMillan merger."

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