The legal community joins other sectors of the economy in the rush to
Law firms take a cross-border trip to the altar
Never mind the Connecticut roots, the plush office at one of New York City’s best addresses on Park Avenue, or the blue-chip credentials that start with a degree from Harvard Law School. Despite Tom Haythe’s place as a charter member of the U.S. legal establishment, he now figures he has all it takes to make his mark—in Canada. For one, there is the fluent French he has acquired over the years, courtesy of careful study and a wife from France. For another, Haythe has been a frequent visitor to Canada in recent years on business for clients. Most important, as of Oct. 4, he became presiding partner of the new law firm of Tory Haythe, the product of the first such substantial cross-border merger in North American history. “Already, I find I’m starting to say ‘eh’ all that much more,” the elegant 60-year-old says with a smile.
Beyond the inevitable jokes about grammatical and cultural differences, the move is serious business. It pushes one of Canada’s leading law firms— the former Tory Tory DesLauriers & Binnington—onto the international stage, with the obvious risk that the focus of its activities may shift to New York. Tory Tory’s 225 lawyers at the time of the merger included former Ontario premier William Davis and former Ontario Court of Appeal chief justice Charles Dubin, while its clients include Rogers Communications Inc. (owner of Macleans), Thomson Corp.,
CanWest Global Communications Corp., EdperBrascan Corp., and Manulife Financial.
Until recently, the legal profession was one of the few business areas to resist the rush of global mergers. Some firms are already international, such as the huge Chicago-based Baker McKenzie. It has offices around the world— but its operations are structured so that individual offices function on their own. And some Canadian firms, such as Goodman Phillips & Vineberg, have lawyers who can practise U.S. law.
As companies around the world pair off, lawyers—the people who implement mergers—are themselves rushing to catch up. Besides this merger, three major firms—Clifford Chance of London, Rogers & Wells of New York, and Puender Volhard Weber & Axster of Germany—voted in September to merge as of Jan. 1. “Anyone who thinks these are isolated incidents is stuck in the past,” says Christopher Bart, a professor who specializes in corporate strategy at the Michael G. DeGroote School of Business at Hamilton’s McMaster University. “Law is joining accounting and every other sector of the economy in globalizing.”
The merger of Tory Tory with Haythe & Curley, which has 75 lawyers, is “being done primarily because it so perfecdy fits the interests of our clients,” says Toronto-based managing partner Les Viner. But, he also adds, “We had probably reached the stage where we could not grow further in Canada, so growth had to come elsewhere.” By
contrast, Haythe says that his firm, which he helped found in 1982, “had stayed small as a matter of choice. But when we looked around, we realized there were only a handful of other boutique firms remaining in New York. So we thought marriage was a good idea—on the condition we find the ideal partner.”
In fact, both sides bring distinctive strengths to the mix. Many of the former Tory Tory clients already do regular business on the Wall Street capital markets. As well, New York state business law governing mergers and acquisitions is increasingly regarded as the world standard—so that even deals in other countries that do not involve U.S. companies are structured by New York legal rules. That made increased access to New York important for Tory Tory. On the other hand, the smaller Haythe & Curley sharply increases its resources, and its expertise in handling private and public equity transactions and mergers and acquisitions melds well with the strengths of the Toronto firm. It has a Beijing office and significant presence in Asia, which, Viner says, “coupled with Tory’s Latin American business, carries us around the globe very nicely.”
There are several compelling reasons for that, for law firms in general and Tory Haythe in particular. As businesses increasingly expand beyond their country’s borders, they want their law firms to serve them wherever they go. But at present, most domestic law firms with offices abroad staff them with Canadian lawyers who do not practise local law.
The legal community joins other sectors of the economy in the rush to
Instead, they advise companies on Canadian law. When Canadian clients need legal services in another country, they are referred to a local firm. Similarly, American firms that keep offices in Canada usually do not practise Canadian law. By contrast, Tory Haythe’s mix of New York and Toronto-based lawyers means it now offers full service on both sides of the border.
There are a variety of reasons why international law mergers have not been commonplace. For one, different countries—as well as states and provinces—practise different forms of law, and lawyers need to be licensed in each jurisdiction. As well, law firms face some unique and specific tax and legal hurdles. Also, the Law Society of Upper Canada has strict rules requiring all named partners of law firms to be licensed in the province—which Haythe is not. The two companies will continue to be registered separately in New York and Ontario. Then, there is the sharp difference in the value of the two countries’ currencies, which means that a top-billing lawyer in Toronto
may take in far less than a less high-profile counterpart in New York. And Tory Tory has clients who invest in Cuba— a move that is forbidden under U.S. law. As a result, that segment of business will be kept separate from the new partnership.
But both sides agree that the most important consideration in their 10month-long merger talks was the seemingly innocuous word “culture.” That refers to everything from the collective mind-set of the two firms, to the manner in which earnings are distributed among partners and the way in which to structure the new company so that neither side felt it was being subsumed. “Naturally, there were concerns about the control implications,” says Viner, in a reference to the perils of joining with a firm in the heart of the world’s busiest business centre. Similarly, Haythe says he faced similar concerns from his partners about joining with a firm that has three times as many lawyers.
Some of those concerns were resolved by the establishment of a seven-mem-
ber executive committee made up of three partners from each city, with Viner as the overseer. Haythe defines his own tide as being “similar to that of a chairman,” but says the distinctions between his role and that of Viner were deliberately left vague. Over time, he said, an unspecified number of Canadian, Toronto-based lawyers are expected to move to New York, and to pass the New York bar so they can practise there.
For now, both key partners in the new firm are cautious about saying whether they are on top of a new trend. “The marketplace is changing, but individual firms will find individual ways of reacting to that,” says Viner. And Haythe, for his part, says that other firms studying the idea may find they like the concept more than the reality. “It’s a lot like a marriage,” he says. “Everybody you talk to is in favour of the idea, but it doesn’t work out unless you’ve found the right partner.” And if the marriage doesn’t work out, neither side should have to look far to find a good lawyer, d
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