The corporate mid-market embraces transaction work, primarily involving knowledge-based companies, where the transaction size is typical of the Canadian mid-market without regard to the revenues of the entities involved.
Private Equity Eyes the Canadian Mid-Market
In pure deal volume, the Canada small and mid-markets are the largest private equity (PE) market by deal volume in Canada. Indeed, some 75 percent of private equity deals have an enterprise value of $24 million or less.
Perhaps seeing something that their Canadian counterparts have long realized, even large US PE firms have emerged as significant players not only in the Canadian mid-market but also in the small market, in both cases partly because the pricing there is more attractive and less competitive than on larger transactions.
One potential hotbed for PE may be in the Maritimes, where Victor Chu, a major international investor from China who is Chairman and CEO of First Eastern Investment Group, announced in 2015 that he was creating a $50 million PE firm focused on Nova Scotia companies with expansion potential into the Asian market.
New Brunswick, where tech giants like IBM, Salesforce.com, and LiveOps have in the last few years bought out companies that started with seed capital from local investors, also has considerable potential for PE investment largely due to the vibrancy of its venture capital market and strong government support.
The province has one of the most competitive small business investor tax credits anywhere and recently expanded the credits for qualifying corporations and trusts.
Mid-Market Law Firms and Globalization
While most of the brouhaha surrounding the global expansion of Canadian law firms has touted the mega-firms, the mega-clients, and the mega-transactions, firms focused on serving mid-market clients have been expanding their international reach as well.
By way of example, consider Miller Thomson LLP, Canada’s ninth-largest firm with approximately 500 lawyers and offices in Toronto, Montréal, Vancouver, Calgary, Edmonton, Markham, Waterloo, London, Guelph, Regina and Saskatoon. The firm doesn’t have the same proportion of large Canadian companies looking abroad as some other large firms. Instead, from an international perspective, the firm targets the inbound work from the mid-market, medium-sized investor who looks at Canada on its own merits or as a gateway to the US. Consequently, Miller Thomson sees no need for foreign offices, even what are known as representative offices. Instead, the firm’s strategy has been aimed at establishing a good friends network among law firms in the US and Europe. To that end, Miller Thomson has a client base in the UK, is doing more development work in Italy, and considering opportunities in Northern Europe. But although the focus is on inbound work, Miller Thomson is also positioning itself to access high quality representation abroad. In April, the strategy culminated in an affiliation agreement with FIDAL, France’s largest business law firm comprising 1,200 lawyers and 90 offices.
For strictly regional firms seeking international business or exposure, however, networking may be the strategy of choice. Networks appeal to firms who cherish independence and flexibility in their relationships but want a formal association that gives them global reach. Networks meet these criteria because they offer a form of territorial exclusivity while leaving members free to pursue pre-existing relationships and new opportunities with non-members.
Ten Canadian firms, for example, are members of Meritas, a coalition of 173 regional firms in 229 markets in over 80 countries. The Canadian members are BCF LLP in Québec; Benson Buffet PLC, Inc. in Newfoundland; Boughton Law Corporation in BC; Brazeau Seller LLP in Ottawa; ; Key Murray Law in Prince Edward Island; Lawson Creamer in New Brunswick; McLennan Ross LLP in Alberta and the Northwest Territories; Minden Gross LLP in Toronto; Robertson Stromberg LLP in Saskatchewan; and Wickwire Holm in Nova Scotia. There are also member firms in each of the 50 American states, every country in South America and most Central American jurisdictions.
The network concept works especially well for firms serving multinational manufacturing companies, particularly those that require financing based on the security of local assets, and deal with supplier, leases and real estate around the world. To ensure a consistent standard of service, the organization has developed a vaunted quality assurance program and even offers integrated billing services and dedicated contacts at all the member firms involved in multijurisdictional transactions. Meritas has also created international practice groups in areas such as banking and private equity.