Lexpert Magazine

LEXPERT MAGAZINE | SEPTEMBER 2016 45 | MID-SIZE FIRMS | sation expectations are going to have to change, but if they do, they're going to have a way better life." MOST MANAGING PARTNERS of mid-size law firms feel that the large national firms, which were once happy to walk away from small and mid-size clients, are having a change of heart as works gets harder to come by. e large firms have not only gotten "leaner and meaner and better on pricing," as one managing partner put it, they've even become much more interested in small clients — provided they're start- ups. No one wants to turn away the next Shopify or Kobo. So the large firms are taking some of the business that would have gone to a firm like Pallett Valo LLP, a 35-lawyer firm located in Mississauga, a Toronto suburb about 30 minutes west of downtown, says Bobby Sachdeva, Pallett Valo's managing partner. But, at the other end of the spectrum, so are some of the three-and four-person shops. "You have a lot of bigger law firms de-equi- tizing very knowledgeable senior partners, probably a combination of 40-somethings wanting more power and mandatory retire- ment ages," he says. "Whatever it is, you have a lot of law- yers who are living longer continuing to practice — be it part-time or full-time, out of small shops. ere are some small firms that are bringing in guys in their 60s because they're bright guys. ey know what they're doing, they're not looking to make the same money they did at the big firms, they're happy to stay busy and make some money." Mid-size firms like Sachdeva's are find- ing that some of their long-time clients, older entrepreneurs who have been well- served for years, are increasingly going to the tiny firms when the time comes to sell. "If you're selling your business for $3 mil- lion or $4 million, the normal 65-year-old entrepreneur type doesn't care if we're go- ing to do the best job in the west end," he says. "He's going to look and say, 'Okay, you guys are going to do it for $50,000? I've got a guy that will do it for $20,000.' So, in a sense, we're being forced to upscale in terms of the clients we're chasing." He says the same thing happened in the residential real estate market 15 years ago, "which is why we got out. We were doing tant is Panattoni Development Co., a gi- gantic industrial developer and builder that uses Ricketts "right across the country with local counsel, as needed." Another client, which Luspring de- clined to name, "but which will generate hundreds of thousands of dollars" in fees, is a refugee from a top-tier Canadian firm that has nearly 400 lawyers in international offices, who le a top management position at a large corporation. "Once he wasn't in control of his big corporation because he had exited, they forgot about the fact that he had millions and millions of dol- lars in personal mon- ey and was going to continue to invest in little businesses. And nobody there cared." Clients go to firms like Luspring's, he says, because they get sophisticated lawyers at lower rates. Luspring, who litigates for insurance companies on D&O claims — "the Hollingers, the Sino-Forests, that kind of thing" — says he charges out at $500 to $700 an hour, where most of the litigators on the other side of the same cases charge out at $850 to $1,000 an hour. Generally, across the board, he says the firm is able to charge 25 or 30 per cent less. He says Ricketts doesn't do many alter- native fee arrangements, "but for me, for example, I have budgets and I have to stick to them. If I'm going to go over, I need to get approval first." What he does more of, he says, is success fees. Asked about the future of mid-size firms, he feels it's bright as long as they focus on three or four key practice areas, and don't try to do everything. "Be nimble, get creative. In Canada, there are very few files that you need more than a couple of lawyers on, and to the extent you do, we don't have that. We don't compete for that kind of work. But there aren't that many of them. On the majority of matters, one or two will do. "And when you're talking about the fu- ture of mid-size firms, we can offer a better life to associates. We still do training, we still can be a lot closer, a lot more hands-on with younger associates. eir compen- LLP in Toronto. e smart firms will do well, he says, "but I think there'll be challenges for those that don't have a clear focus. A lot of mid-size firms have fed off of — and I don't like the description — commodity- type work, very basic work for certain cli- ents who would never look at the bigger firms. But I think there are going to be alternatives in the near future and I think there is price pressure on that work. "A lot of that work's just going to disap- pear — it's going to be taken in-house, it's going to be outsourced. e accounting firms will do that work in due course." Mid-size firms that are focused and have good lawyers "can pick off work from the big firms because they're under tremendous pressure and they have infrastructures that will not permit them to do some kinds of work. Big firms are going to have a chal- lenge doing $50,000 files. Mid-size firms can feast on those, right? You do some fairly sophisticated M&A and other work where there's only a few million in a change in assets. I think mid-size firms can do very nicely on those, thank you very much, and the big firms can't touch them. "at work, which requires sophistica- tion, which requires good training, just can't be done by the big firms — a lot of them won't even take on a new client unless they can be assured of generating a certain minimum amount of fees from that client." Ricketts is on the opposite end of the scale from Field Law and WeirFoulds. It has only about 20 lawyers — but it has some large clients. One of its most impor- "For a while, we felt like the farm team for the big firms. People would come here, get some good experience, then fly off to a better offer. That will always be a challenge." THOMAS KEAST > WATSON GOEPEL LLP

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