Thursday, April 26, 2018
With a passing glance at Acritas’ Canadian Law Firm Brand Index 2018, many Canadian firms who have resisted the impulse to merge with global giants might just be patting themselves on the back.
But the self-congratulation probably shouldn’t go too far, because any euphoria would be a tad hasty and somewhat misplaced.
“The Top 10 brand index results show a really strong Canadian market and high levels of satisfaction, so that generally speaking things are good,” said Lizzy Duffy, vice-president of Acritas. “But if we look at the legal market as a whole, we see that global firms are taking over the Canadian market.”
To be sure, Canadian-based firms hold eight of the top 10 spots in the brand rankings. Blake, Cassels & Graydon LLP leads the pack for the third year in a row, again by a wide margin; McCarthy Tétrault LLP and Stikeman Elliott LLP hold down second and third place, respectively.
The two global firms in the pack are Norton Rose Fulbright, ranking fourth, barely behind McCarthy and Stikeman; and Dentons in eighth, some 10 “brand index” points below a grouping consisting of Borden Ladner Gervais LLP, Torys LLP and Osler, Hoskin & Harcourt LLP, who make up a third grouping occupying fifth, sixth and seventh place.
The top 10, of course, are the headlines. I’m not saying don’t believe the headlines, but they’re not the whole story — at least not for the 140 Canadian firms ranked below the top 10 in the brand index.
“While the firms making up the top 10 have been consistent since the index was first published in 2012, we see a lot of change further down the list which reflects clients’ evolving needs,” she said.
Duffy based her conclusion on statistics from a Sharplegal survey dataset. The data comes from 250 interviews with Canadian respondents in organizations with more than $50 million in revenue and who have senior responsibility for buying legal services. Sharplegal also interviewed 99 senior counsel from outside Canada who were asked which firms they used for their Canadian legal needs.
According to the survey, Canadian firms in 2012 held 85 per cent of total brand equity in the Canadian market; global firms eked out a a mere three per cent. Currently, however, Canadian firm share is down to 69 per cent even as global share has risen 800 per cent to fully 25 per cent of the market. The Canadian brand equity of foreign firms other than global firms, mostly from the U.S., also deteriorated from 12 per cent to six per cent.
Compounding the problem is that nearly half of elite global organizations need legal help in Canada, a 20 per cent increase. “This means that global firms can leverage the demand for Canadian work from half of their clients around the world although so far, Canadian firms are still receiving the lion’s share of inbound work,” Duffy said.
Still, Canadian firms’ share of inbound work fell from 94 per cent to 79 per cent between 2012 and 2018; global firms’ share rose from four per cent to 18 per cent; and U.S. firms’ share remained constant between two and three per cent.
The reason? According to Acritas’ client satisfaction benchmarks for Canada, law firms are not changing quickly enough to enhance efficiency and value.
“Clients are moving to hire lawyers who bring a business perspective,” Duffy said. “In Canada, being practical and pragmatic is the most differentiating quality of exceptional lawyers from the client’s perspective, and business understanding is an area that clients think outside counsel need to improve.”
On the outbound front, the news isn’t much better.
Some 80 per cent of Canadian clients have international needs, a 15 per cent increase over the last five years. As a group, Canadian clients allocated about 37 per cent of their legal spend outside Canada. Duffy said international spending is projected to increase faster than domestic spending.
All that would be nice if Canadian firms were keeping up with global firms in securing the international spend of Canadian clients. But they’re not.
“Even Canadian firms with international platforms are seeing their market share diminish as clients evaluate what global firms can now offer,” Duffy said.
So go easy on the backslapping, for fear of breaking a collarbone or two.