DLA's Canada Play Falls Through, For Now

, The Am Law Daily

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Toronto's Bay Adelaide Centre, home of Heenan Blaikie

UPDATE: 2/11/14, 8:25 a.m. EST. The Am Law Daily reported late Monday that Dentons is in play for between 30 and 40 Heenan Blaikie partners.

Only a few days after DLA Piper announced that it was in talks to open offices in Calgary and Toronto by picking up between 55 and 70 lawyers from dissolving Canadian firm Heenan Blaikie, the world’s largest firm by gross revenue and attorney head count confirmed that negotiations have ended without a deal.

The Am Law Daily reported last week on the sudden collapse of Heenan Blaikie, the first by a truly national firm north of the border. Like the abrupt failure of Am Law 100 firms Howrey and Dewey & LeBoeuf in recent years, Heenan Blaikie’s demise was preceded by the defections of large groups of partners.

Many of the those lawyers joined rival Canadian and U.S. firms—Dentons, which absorbed Canadian firm Fraser Milner Casgrain last year, has added Heenan Blaikie counsel and former Canadian Prime Minister Jean Chrétien amid a spate of hires in Toronto and Montreal—while others have formed entirely new shops in Ottawa and Vancouver.

The Globe and Mail in Toronto and The Wall Street Journal both reported late Friday that talks between DLA and a group of Heenan Blaikie partners led by former co–managing partner Norm Bacal were in trouble. On Monday, DLA stated that the talks were indeed dead.

“As we announced last week, DLA Piper was in discussions with a group of lawyers at Heenan Blaikie about joining the firm in Canada. However, on Sunday night, after additional due diligence and consideration over the weekend, we were unable to agree to economic terms and accommodate the needs of the lawyers at Heenan Blaikie,” the firm said. “As a result, we have ended all negotiations.”

DLA added that it was “extremely impressed with the lawyers we met during this process and wish them all the best. We continue to strongly believe that Canada is an important market for the firm and will explore future opportunities there that complement our global business strategy.”

A DLA spokesman said the firm would have no further comment on the Heenan Blaikie matter. Last week DLA’s Roger Meltzer, the cochair of DLA’s U.S. arm and head of the firm’s global corporate and finance practice, told The Am Law Daily that his firm had retained Toronto’s Aird & Berlis to work with DLA general counsel Peter Pantaleo and global energy chair Robert Gruendel in evaluating the merits of adding a Canadian component out of Heenan Blaikie.

Aird & Berlis is no stranger to Heenan Blaikie, with the two Canadian firms having themselves held merger talks twice over the past decade. Last week The Globe and Mail reported on Aird & Berlis’ hire of Heenan Blaikie real estate partner Marco Gammone in Toronto as the latter firm entered its death spiral.

Heenan Blaikie counsel Roy Heenan, who cofounded the Montreal-based firm in 1973 with Peter Blaikie and Donald Johnston, told The Gazette of Montreal last week that escalating internal rivalries and divisions helped destroy the 500-lawyer firm.

“It’s so unnecessary,” said Heenan, 78, who resigned from Heenan Blaikie’s partnership a decade ago and stepped down as chairman in 2012. “That’s the part that upsets me.”

Heenan, who is poised to take an of counsel role with Vancouver-based Heenan Blaikie spinoff Gall, Legg, Grant & Munroe, also told The Toronto Star that the firm he cofounded had a book of business last year of roughly $201 million—a figure converted from Canadian to U.S. dollars—with a profit of about $67.8 million. The firm’s December billings were a record-setting $31.7 million, Heenan told the newspaper. (The Star reported last week that Heenan Blaikie partners took home between $226,000 and $1.4 million per year.)

In the end, it was dollars and cents—Canadian and U.S.—that pushed DLA and Heenan Blaikie apart.

“Knowing Heenan Blaikie as a friend and client, I know they’ve wanted to salvage as many [lawyers and staffers] as they could,” says Adam Lepofsky, founder and president of Toronto-based legal recruiting and placement firm the RainMaker Group. “Both sides needed to find a number that made sense, so this is purely an economic decision.”

Meltzer, who is poised to assume coleadership of DLA in 2015, told The Am Law Daily last week that his firm was keen on expanding into Canada so it could stop referring work to Canadian firms that it could keep for itself if it had offices in the country. It’s unclear whether DLA’s current partners—and their clients—are comfortable with seeing those referrals go from top-tier Canadian firms to talent recruited from a more mid-tier shop like Heenan Blaikie, according to a trio of sources familiar with the matter.

Heenan Blaikie partners in talks about joining DLA would have become part of a DLA Canada, Meltzer said last week. How those lawyers and any staffers coming with them would be integrated into DLA’s Swiss verein structure—the firm has both U.S. and international arms—was something being worked out in the now-stalled negotiations.

The Am Law Daily reported last week that 4,000-lawyer DLA, which after absorbing an Australian affiliate back in 2011 became the world's largest firm by attorney head count, has been busy in recent years restructuring its operations Down Under and in the United Kingdom in order to make its international LLP more profitable.

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