Canadian Lawyer

50 J A N U A R Y 2 0 1 6 w w w . C A N A D I A N L a w y e r m a g . c o m Moreover, research firm Mergermar- ket states in its trend report covering the first nine months of 2015 that "Canada contributed just 4.2 per cent to North American M&A deal value, the lowest year-to-date contribution on Merger- market record." The damage is most notable in Mergermarket's law firm league tables. The first thing that jumps out is that four of the top firms — including Blake Cas- sels & Graydon LLP, McCarthy Tétrault LLP, Norton Rose Fulbright Canada LLP, and Gowling Lafleur Henderson LLP — were on track to have double-digit declines in their deal count over the comparable time frame last year. Only Osler Hoskin & Harcourt LLP and Stike- man Elliott LLP were bucking that trend, while others were essentially flat. Where the numbers get really inter- esting is in the legal adviser table for deals involving a Canadian company. There, an inordinate number of U.S. and international firms listed in the top 15 for deals based on value (Canadian firms still dominate the list based on total deal count). However, firms like Davis Polk & Wardwell LLP, Debevoise & Plimpton LLP, Cadwalader Wickersh- am & Taft LLP, Wilkie Farr & Gallagher LLP, White & Case LLP, and Herbert Smith Freehills LLP all cracked the top 15, working on 42 deals in total. Interestingly, the same holds true for financial advisers, with American and international banks dotting the deal landscape. That's because much of the Cana- dian M&A activity this year was out- bound, with Canadian companies and pension firms buying foreign assets. The inbound activity, particularly from the U.S., was down noticeably as for- eign buyers virtually shunned Canadian assets. That despite the fact the dollar has been cratering, making our compa- nies more attractive. Mergermarket found that inbound activity was tracking down 50 per cent from last year, while outbound activity was up 138 per cent. Seems foreigners have lost interest in our companies. Who can blame them? Oil is tanking — possibly dropping to $20 a barrel, according to some analysts — so gone are the multi-billion-dollar deals that foreigners paid to get a stake in the oil- sands. China's appetite for commodities is waning as its economy slows, making our mining firms unattractive. This leads to an important question: If Canadian M&A markets are no longer rel- evant in today's global economic climate, did our leading Canadian law firms miss a golden opportunity to leverage their way into international legal mergers when deal market winds blew in their back? Clearly, Canadian law firms are much less attractive merger partners in this envi- ronment than they were a few years ago when our miners were busily acquiring companies in multi-billion-dollar deals and oil was north of $100. While it's true that Canadian orga- nizations are paying billions to buy for- eign entities, largely led by big public pension plans, our domestic law firms don't benefit much from that activity. However, bringing those leads and con- nections into a larger multinational law firm structure would have benefited them greatly during this domestic M&A downturn. Instead, it was mostly foreign law firms that rode the Canadian out- bound M&A wave. It's worth noting that Dentons and Norton Rose Fulbright, international law firms that merged with Canadian opera- tions, managed to climb the Canadian charts based on the value of deals. Canadian companies are increasingly global in nature. While firms like Stike- mans, Blakes, McCarthys, Torys LLP, and Oslers will likely continue to dominate Canadian deal markets for the foresee- able future, I think it's doubtful they'll be topping the deal charts in 20 years — at least not in the form they exist today. Their clients are growing and scout- ing opportunities beyond Canada's bor- ders. How relevant it will be to have a Canadian-only law firm in 20 years remains to be seen, but I'm betting that it won't hold the same sway that it does in 2015. Jim Middlemiss is a principal at WebNewsManagement.com. B A C K PA G E O P I N I O N CLEARLY, CANADIAN LAW FIRMS ARE MUCH LESS ATTRACTIVE MERGER PARTNERS IN THIS ENVIRONMENT THAN THEY WERE A FEW YEARS AGO. . . . @JimMiddlemiss By Jim Middlemiss ow the mighty have fallen. That about sums up Canada's tepid merger and acquisitions markets in 2015. As I write, there is a scant few weeks before the end of the year. Barring takeover miracles, 2015 can only be described as disappointing, and must surely be causing pain for large corporate law firms that service Canada's M&A markets. It doesn't really matter whether you are looking at deal tables from Thomson Reuters, Bloomberg, or Mergermarket, they add up to a bust. Globally, the M&A market is on fire, up 32 per cent at the end of the third quarter, and on pace for the best year since 2007, according to Thomson Reuters. Canada, however, is another story, down almost 26 per cent in deal value over the same period last year. Worse yet, the number of deals is also down about 17 per cent at the end of Q3, according to Thomson Reuters. Missed opportunity H

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