That's History: Big firm, rich firm: new stages in legal history?

Law firm mergers in recent months suggest there’s a new twist in the history of the legal profession. Will it be bigger or richer?

Bigger is making the news. Recently, Lang Michener LLP merged with McMillan LLP. Aylesworth LLP associated with a Detroit firm. Miller Thomson LLP absorbed one of Saskatchewan’s leading firms.

The biggest splash came from Ogilvy Renault LLP, which is Montreal-based but has been active in Toronto for a decade. It will merge into the British-based international legal practice known as the Norton Rose Group.

Only 25 years ago, a Canadian law firm could be big with a single office and less than 100 lawyers. Then in the late 1980s, a handful of firms led the charge to national expansion by merging or expanding until they had sizable offices in the country’s major business centres.

By early in this century, there was little doubt the national firm platform was here to stay. By then, Calgary and Vancouver firms were moving east as fast as the Torontonians were moving west. Ogilvys was expanding from Quebec.

Fasken Martineau DuMoulin LLP, Gowling Lafleur Henderson LLP, Borden Ladner Gervais LLP, and Fraser Milner Casgrain LLP had spread across the country. Torys LLP had its own growth by moving south to New York City.

It was the biggest reshaping of law firm structures in a century. The lone-combat lawyer was yielding to the multi-city practice group. Law firm management was evolving fast away from consensus-based partnerships towards more corporate structures. Mid-size firms seemed fated to merge or fade.

But something else was going on. Even as everyone was getting bigger, some of the biggest firms in Canada and around the world stopped pursuing growth in numbers.

McCarthy Tétrault LLP’s early mergers had made it Canada’s largest law firm by 1990. For a decade or so, being Canada’s largest law firm was a key goal and a prominent aspect of its marketing.

That’s no longer the case. By 2010, McCarthys actually had fewer lawyers than in 2004. It now stands fourth among Canadian law firms. But that didn’t mean it was sliding on the profitability charts.

It was the same situation internationally. In the 1990s, law firms in New York, Paris, Frankfurt, and London, England, began partnering up. It seemed the world was about to see vast international law partnerships rather like the accounting-consulting behemoths.

That didn’t happen. None of the elite New York and European law firms made mergers in Canada or, by and large, in Australia, Japan, South Africa, and other centres. The leading firms there were too big and, crucially, not rich enough to meet the earnings aspirations of their counterparts in New York and London.

The global leaders, it turned out, wanted to be the richest rather than the biggest. To secure their share of the really top-level, high-priced legal work, major law firms need to be big and international but not too large.

The most profitable firms actually began dropping out of the size race and shrinking their lawyer ranks. Being too big in too many cities, they had grasped, meant a lot of less lucrative retainers. Rather than having more partners in more cities, they focused on greater profits per partner.

It’s now looking similar in Canada. Firms that add offices and lawyers in Edmonton, Regina, Halifax, and Ottawa have a shot at being the biggest nationally. But the country’s most profitable firms seem likely to let them have that distinction.

Will Ogilvys’ merger into Norton Rose change things? Norton Rose is now making the jump the Europeans and New Yorkers balked at a decade ago.

Along with the Canadian entity, it has taken in big firms in South Africa and Australia. It has a rival in DLA Piper, a newly formed British-American-Australian megafirm said to be looking for a Canadian link.

These firms are sure to be the biggest in the world. It’s less certain they’ll be the richest. Last year, Norton Rose ranked only 67th in global rankings by profitability.

Its international outreach may be securing it a kind of global mid-level status while conceding the most lucrative work of the international financial hubs to more focused firms.

Of course, if the international stock exchange mergers mean that most of the key Canadian corporate decisions are going to happen elsewhere, then Ogilvys’ move may come to signify a change as big as those of the 1980s. But that remains to be proven.

Christopher Moore’s newest book is The British Columbia Court of Appeal: The First Hundred Years. His web site is christophermoore.ca.

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