DLA Eyes Canada After Heenan Blaikie Goes Bust

, The Am Law Daily


Toronto's Bay Adelaide Centre, home of Heenan Blaikie

But several legal consultants and law firm leaders in Canada tell The Am Law Daily that a chill is sweeping through the country’s legal sector.

“To some extent Canada was immune from the immediate impact of the recession,” says R. Scott Jolliffe, chairman and CEO of Gowlings. “Now there’s been a couple of dry years for transactions, which has further depressed the market, and then you’ve got the standard issues like an oversupply of lawyers, demand for better pricing and increased competition all putting pressure on firms.”

Colin Cameron, a founder of Vancouver-based Profits for Partners, Management Consulting Inc., says many Canadian firms have “been living in a dream world” for the last three to five years. With the country’s commodities boom stalled due to China’s diminished desire for natural resources and Canada’s financial services industry suffering a slowdown, a legal shakeout may be looming.

“The Canadian legal market has been protected, but times have definitely changed, so this is sobering, if not disturbing,” Gowlings’ Jolliffe says, asked about the potential ramifications of Heenan Blaikie’s collapse. “I’ve always said that managing a law firm is like running an internal combustion engine—some pieces are up and some are down—and you’ve just got to keep moving forward.”

Cameron says Canadian firms have generally been more conservative than their U.K. and U.S. counterparts in that they’re not highly leveraged and usually have little appetite for risk-taking. Heenan Blaikie rode its country’s economic success by increasing head count and opening new offices.

The firm moved to extend its international reach a little more than two years ago by adding 16 lawyers to launch its new Paris office in 2011. But that base took a hit later that year when the firm’s former international business director, Jacques Bouchard Jr., resigned amid reports tying him to illicit business deals with certain French-speaking African regimes. (Bouchard pleaded guilty to seven disciplinary infractions in late 2012.)

In 2009\ Heenan Blaikie added to the expense side of its ledger when it announced a new long-term lease for five floors of space at the new 51-story Bay Adelaide Centre in Toronto. The firm also recently renovated its office in Montreal and moved to new space late last year in Sherbrooke, Quebec. Heenan Blaikie was dealt another financial blow when several ongoing litigation engagements concluded, according to a report this week by Canadian Lawyer magazine.

D. Shawn McReynolds, managing partner of Toronto-based Davies Ward Phillips & Vineberg, sees similarities between the myriad factors that killed Heenan Blaikie and the bad year that preceeded the 2011 demise of Am Law 100 firm Howrey.

“I think what you have here is a complete loss of confidence in the future,” McReynolds says. “It’s never one thing—it’s the totality of strategy, culture and execution. I don’t know if the cultural issues there were any different than any other firm, but when the erosion starts, it’s breathtaking how fast it goes.”

McReynolds insists that Canada’s top-tier firms—Davies Ward is one of the Seven Sisters—are doing very well. He predicts that it will be the country's second- and third-tier firms that feel the sting of changing market forces.

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