As we come to the close of 2008, and one of the most tumultuous quarters in the history of financial stocks, law firms say the mergers and acquisitions market has frozen up as stiff as the Canadian tundra.
“We’ve seen an important part of our practice evaporate in effect, the sort of large public M&A transactions which depend heavily on liquidity in the credit markets,” says Andrew Fleming of Ogilvy Renault LLP. “That doesn’t mean they’ve disappeared . . . they haven’t disappeared, certainly they’ve slowed down, they’ve come to a screeching halt, I guess is a better expression.”
Despite business grinding to a halt, some firms believe it isn’t a good time to rest on their laurels. On the same day law firms were lamenting the slow down in M&A business, McCarty Tétrault LLP, one of Canada’s largest firms, sent out a press release announcing its Montreal office had hired a new senior M&A lawyer. “We see a market with challenges, on the other hand we see that there are opportunities still,” says Marc-André Blanchard, McCarthy’s Quebec regional managing partner.
Blanchard says he believes the competition to buy up companies will be reduced because of the present market conditions. Therefore the competition between law firms to get what business is left may intensify. “Whether you are in recession or not, the law firms with the best lawyers will always be leaders and will always be market leaders.”
One company that may take advantage of a potential buyers market is the Royal Bank of Canada. David Allgood, executive vice president and general counsel joked at the Association of Corporate Counsel meeting in Seattle, Wash., in October, that the fortunes of RBC had risen simply by sitting still.
He concedes that while RBC stock fell in the fall of 2008, because of the resistance to get into the “toxic stuff” in the U.S., the bank’s stocks outperformed other, well-known world banks. That may leave RBC looking for buying opportunities, but don’t expect the Canadian banking giant to jump into unsettled waters headfirst.
“We’re always looking,” Allgood says. “Whether things settle out enough that we do something in the U.S., I don’t know. I think our CEO has expressed cautious optimism that we might find the right thing to do in the U.S., but things are pretty unsettled right now for doing much serious M&A work.”
When the market does come back, the key is providing the right advice to clients, says Doug Marshall of Osler Hoskin Harcourt LLP, which has offices in the U.S. and Canada. Marshall worked on RBC’s acquisition of Phillips, Hager, and North investment management firm in early 2008.
“Lawyers are often accused of raising a bunch of reasons why you can’t do something as opposed to how it is you can get [it] done,” says Marshall. “That’s what boards need, they’ll make the business decision on whether to do something or not . . . they don’t want to be bombarded by 15 reasons they can’t do something, they want to be told if you want to do this, here is how it can be done . . . we think it adds value.”