Medium-sized law firms having a hard time

law firms
“What burns me up is that the answer is right here somewhere, staring us in the face.”

Grondin, Poudrier, Bernier, a Quebec City law firm that honed its reputation in labour law before branching out in other practice areas, will be disbanding at year end, marking the second Quebec medium-sized law firm to take drastic measures over the past couple of weeks to come to grips with a faltering economy and saturated legal marketplace.

Faced with shrinking business and a growing number of clients absconding to larger law firms, partners at Grondin, Poudrier, Bernier recently decided to cut its losses after 61 years in business, throwing up in the air the fate of more than 30 lawyers. A small group of lawyers is expected to form a new boutique law firm, specializing exclusively in labour law, said Henri Grondin, one of the firm’s partners.

“Not everybody was happy but I believe we could have continued,” said Grondin. “After more than 40 years of a law firm carrying my name, I am faced with a decision that will chuck all that way, and I wasn’t even consulted,” added Grondin, who admitted he was bitter by the turn of events.

In early May, Bélanger Sauvé LLP shook the Montreal legal community after it announced that its diversification into business law was a flop and that by year end its business law department will be dissolved. The firm and its business law group, which comprises of almost 20 lawyers, decided to part ways after it conceded that it was not able to generate enough business. Efforts to increase both the number of lawyers within the business practice and bolster the number of specialities it could offer to clients failed. As a result, the firm has opted to practice only in its mainstay business – insurance law and administrative law, primarily municipal and labour law.

“That is a scenario that is likely going to be repeated,” said Jean-François Thèorèt of Haney Legal Recruitment. “We will be seeing a growing number of law firms who will decide to specialize to become essentially boutique firms.”

Quebec medium-sized law firms are now at a crossroads. Too small to stand up to the large firms capable of offering a broad range of services under one roof and not nimble enough to stare down boutique firms who have successfully carved a niche, medium-sized law firms are caught in the middle.

“The market is saturated,” points out Dominique Tardif, the manager of the Montreal office at ZSA Legal Recruitment. “In Quebec, we know, that is isn’t easy for medium-sized law firms to find repeat clients while stave off the competition from boutiques and large law firms. Medium-sized law firms face daunting challenges, and some have stood up to the challenge better than others.”

According to Raymond Crevier, the former head of Montreal-based Ogilvy Renault from 1994 to 2005, medium-sized law firms face a forbidding future. He points out that there is a wide and growing perception  within legal circles that in order to be profitable law firms either have to be small and specialized or national in scope, with little room in-between.

“As a general rule, a boutique firm that practices in a a very clear specialized field and that has earned a fine reputation, shouldn’t worry,” said Raymond Crevier, who recently left retirement to join Fitzwilliam Legal Recruitment of Montreal. “Medium-sized firms, however, face three choices: either section itself off into a boutique firm, merge with a large firm that is ready and able to absorb it, or remain in business and stand up to its greatest challenge – to develop and hold on to its clients.”

While no easy task, successful medium-sized law firms have generally positioned themselves as a haven for small-to-medium-sized business (SME) capable of offering a varied selection of legal services at affordable rates, something that large law firms can ill-afford to do thanks to their large overhead, notes Crevier.

Key, though, is to have a shared vision among partners on how to run the firm – something that was absent at Grondin, Poudrier, Bernier and ostensibly also at Bélanger Sauvé, according to observers of the Quebec legal milieu.

“It becomes far more difficult to develop a brand of the firm if people don’t see things the same way,” explained Tardif, who previously practiced with Robinson Sheppard Shapiro in their civil and commercial litigation department. “It’s important, up to a point, to share the same vision in order to run the firm, and tackle such things as how to determine rates, expand and maintain the client base, evaluate the performance of lawyers, and grow the practice.”

Ironically, the demise of Grondin, Poudrier, Bernier and Bélanger Sauvé’s business law department is proving to be a golden opportunity for medium-sized law firms to grow their practice. The competition to recruit new talent from the ranks of the two firms is stiff, particularly since most passed off the opportunity to take advantage of the downfall of Desjardins Ducharme two years ago. A Quebec law firm that appeared to be heading for a bright future, Desjardins Ducharme collapsed under the weight of illiquidity, poor leadership and an absence of coherent vision, and the majority of its lawyers headed off to Lavery de Billy, now known as simply Lavery.

“I know there are certain lawyers at Bélanger Sauvé who are being courted by more than one law firm,” said Thèorèt. “A lot of medium-sized law firms lost the opportunity to recruit good talent and grow their practice when Desjardins Ducharme collapsed. This time round, they are demonstrating interest for individuals or groups of lawyers.”

But not all lawyers are of interest, added Thèorèt. Law firms are now “cherry-picking,” and are interested only in luring lawyers who have solid credentials and a significant client base willing to follow them to their new practice.

“It’s going to be far more complicated for lawyers who are furnished clients by other partners or associates – they are really going to have a tough time finding something.”

Originally published in The Lawyers Weekly.

About Luis Millán 346 Articles
I am a law and business journalist. I write for Canadian Lawyer, the National, a magazine published by the Canadian Bar Association, and The Lawyers Weekly, an independent legal Canadian publication. This blog is in no way affiliated with any of these publications.

1 Comment on Medium-sized law firms having a hard time

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