Around The Track

Horner is not very retiring, even if he has retired from Osler after 30 years. Here, he reflects on the practice of M&A law, and projects on its future

MANY FINE LAWYERS from Canadian law firms have retired without Lexpert writing about it.  Several of those, like Clay Horner, retired from a national firm, in his case Osler, Hoskin & Harcourt LLP. Why then is Lexpert choosing to spend its time and attention on Horner? Perhaps because he rose to local fame and prominence at the same time Lexpert did and the chronicling of the M&A deals he worked on filled Lexpert’s pages. Those deals are changing, and Lexpert would like to keep up: a conversation with Horner recalls that era in Canadian M&A but leads to a discussion of the future for its practitioners and our readers.

For a time, Canadian law firms seemed like equal players with the major firms from the United States and the United Kingdom. Companies bought and sold each other - Canadian companies sold to global ones - and they needed strong Canadian counsel. Things were done differently here, then, and that gave rise to a seemingly golden era. Lexpert was privileged to chronicle and promote that era.

At some point as the era shifted, as they all do, Clay Horner had a terrible ski accident. We don’t know much about that. But still he led on major Canadian deals and those referred by U.S. deal firms: Tim Hortons; Shoppers Drug Mart/Loblaws; and the acquisition of Cirque de Soleil, for example.

Canada is a closely held economy and society. People don’t intrude, ask personal questions too early. Instead, they get to know people over time and with discretion. Horner flourished in that environment; developing relationships with the owners, often families, of Canadian companies. “Working with families, you learn what is valuable to them, this provides context about what would and would not work between certain partners in a business deal.”

His contemporaries from other firms, including Gary Girvan at McCarthy Tétrault LLP, and Sharon Geraghty then at Torys LLP, were learning about their Canadian clients too. “I remember one deal,” said Horner, where Gary Girvan and I left the packed McCarthy Tétrault boardroom and had a conversation about what it would take for each of our clients to put it together. It took another four months but we were spot on what the real issues would be and how they likely would be resolved.”

Oftentimes, Horner had been introduced to these families, other owners, and executive leads, by the late Atlantic Canadian legal and business powerhouse, Purdy Crawford, who had a sui generis personal touch. Crawford, who was still very active in his 80’s, told Horner that “as for the balance between Emotional Intelligence and IQ, every year I think Emotional Intelligence is an additional 1% more important” in business.

Clay Horner was therefore chosen for several of those business owners’ M&A mandates. Many Canadian companies were sold during a time loosely coinciding with the first two decades of Horner’s practice. Some called it a “hollowing out of corporate Canada,” while others would say this was and is exciting; we were part of worldwide change in several business sectors.

Either way, it has to be acknowledged that those companies to a large extent left Canadian control. From henceforth, U.S.-led law firms would take charge. At Lexpert, we noticed the U.S. law firms move up on the law league tables. Moreover, as Horner points out, even if they were behind on the actual league table, they could command significantly higher legal fees for mandates in Canada than Canadian firms could.

So who is Clay Horner, legally speaking? According to Osler’s website: he is “a nationally and internationally recognized leading advisor for mergers and acquisitions in Canada. [He] has extensive experience in counselling senior management and Boards of Directors of leading public and private corporations. He has acted on many significant transactions with U.S. and international law firms and investment banks, particularly in respect of cross border transactions. [He is a Former Chair of the firm and Chair of its Corporate Department]. He was lead counsel to the ‘Wise Persons’ Committee’ appointed to recommend the best securities regulatory system for Canada and, as a former managing partner of the New York office, worked extensively in cross-border acquisitions, divestitures and financing.”

As for the deals he worked on? Here is a partial list from the Osler website:

– Blackstone-led Consortium in its $20 Billion Partnership Agreement with Thomson Reuters (which publishes Lexpert)

– TPG Capital LP in its proposed acquisition of Transplace Inc.

– WS Atkins PLC in its acquisition by SNC-Lavalin Group Inc. in a deal worth $3.6 billion.

– Special Committee of INFOR Acquisition Corporation in first qualifying acquisition by a Canadian SPAC.

– Special Committee of Intertain Corporation in connection with a strategic review and UK redomiciliation transaction.

– Canadian Oil Sands in connection with response to hostile bid by Suncor and ultimate negotiated transaction.

– TPG Partners VI, L.P. in its acquisition of Cirque du Soleil.

– Valeant Pharmaceutical in its acquisition of Salix Pharmaceuticals, Ltd.

– Tim Hortons Inc. in its $12.5 billion merger with Burger King, creating Restaurant Brands International, a new global powerhouse restaurant company based in Canada.

– Valeant Pharmaceutical in its arrangements with Pershing Square and proposed acquisition of Allergan.

– Valeant Pharmaceutical in its $8.7 billion acquisition of Bausch & Lomb Incorporated.

– Shoppers Drug Mart in its $12.4 billion acquisition by Loblaw Companies Limited.

– The London Stock Exchange in its proposed merger with TMX Group.

– Equinox Minerals in its offer for Lundin, response to the Minmetals bid and acquisition agreement with Barrick.

– Kinross Gold in its business combination with Red Back Mining.

– Goldcorp in connection with the sale of its controlling interest in Terrane to Thompson Creek Minerals.

– Addax Petroleum in connection with its acquisition by Sinopec International Petroleum Exploration and Production Corporation.

– Telus Inc. in its participation in the sale process for BCE Inc.

– Kinross Gold in its acquisition of Aurelian Resources.

– Lundin Mining in its proposed business combination with HudBay Minerals Inc.

– Placer Dome Inc. in the unsolicited offer by and acquisition by Barrick Gold Corporation.

– China National Petroleum Corporation International in its acquisition by plan of arrangement of Petrokazakhstan.

– Glamis Gold Corp. in its agreement to combine with Goldcorp.

– Torstar Corporation in connection with its agreement to sell its interest in CTVglobemedia to BCE Inc.

– Special Committee of the Board of Directors of Lafarge North America in the offer by Lafarge S.A. to accquire the 46.8% minority stake.

IT HAS BECOME axiomatic to say law is “about relationships.” Horner actually explains what that meant for him. After articling and practising for four years in Osler’s Toronto office, in 1990, Horner headed to New York, to establish and be the Managing Partner of the firm’s new office there. “I grew up with associates and young partners at large New York firms,” he says. “I worked as an equal with associates at my level” and they grew to prominence together. He suggests that Canadian associates don’t have that opportunity anymore. Now, according to Horner, Canadian lawyers are typically working episodically by email or telephone with a “junior or at best a mid-level associate in New York. Some lawyers, Horner suggests, are accepting of this scenario. “Lawyers from Canadian firms give up, saying ‘I’ll just answer the question I’m asked'. They are not trying to impress people.” They will tell their lawyer in the US what the law is as it applies on the point in Canada, but as for the provision in deal documents, oftentimes they say, “I’m not even going to draft it.”

Work is consolidating internationally, U.S. law firms are dominating the mandates, and as Horner points out, “people don’t physically need to get together”. What then, can Canadian lawyers, especially at the associate level, learn from Horner’s career as they plan their own?

Horner suggests three potential opportunities:

First, to the extent national and global mandates are not as available as they once were, newer lawyers can seek out smaller, entrepreneurial companies. Before you take this route, however, make sure you are comfortable with the fact that these entrepreneurial companies, if successful, will likely sell to larger ones, and you may lose the mandate. As a Canadian lawyer, you will need a succession of these entrepreneurial companies to succeed.

Secondly, if you are staying with U.S. and global clients, Horner advises: “Add value where you can. If there is an opportunity to draft a particular section of an agreement that reflects the Canadian business, jump at it.” There might be an opportunity here for some, says Horner, to open a boutique practice advising U.S. clients, giving “top level advice, which will be a high quality experience. People on the other side will get to know you and respect you.”

Thirdly, bear in mind that certain practice areas are still behind a “moat” of Canadian law: Intellectual Property, Employment and Commercial Real Estate, to name three. Do these interest you, reflect your talents? Then pursue one of them. A word of caution though, from Horner: building a practice in one of these areas is fine in a boutique scenario, but challenging in a large firm context if you are trying to draw several disparate practices together into a unified team with C-suite access.

Horner makes it clear that the principal highlights of his legal career were not, in fact, strictly legal. He was afforded the opportunity to assist corporate leaders making overall business decisions. A particular legal decision was just part of that. He speaks, for instance, of the time working on a deal in a hotel in Johannesburg, South Africa: then President Nelson Mandela entered the ballroom to tell the dealmakers how important this deal was for the new emerging republic. It was a mining deal, where a significant percentage of the miners were HIV-positive. Horner’s client was including the first-ever corporate healthcare in the terms of the transaction.  

Horner speaks of another deal, in which only the CEO of a Chinese state-owned company was prepared to ask a question evidencing that he did not understand the point at issue. After Horner took him aside, he began to explain his real concerns and his insights, which underlay the willingness of his company to take risks which would be uncommon for other buyers.

A corporate legal career is still taught by apprenticeship, says Horner.  What did he try to teach? From whom did he learn? Both of these questions bring the conversation back to Purdy Crawford. Crawford was a pillar in the development of Osler, Hoskin & Harcourt LLP, of large law in Canada, and of Corporate Canada. He joined Osler in 1956, specializing in corporate and commercial law, became a partner in 1962, and a senior partner from 1970 to 1985.

In the early 1960s, Crawford worked with the Kimber Committee, which recommended a new securities law for Ontario in 1965. He was involved in drafting the legislation to implement the Kimber recommendations, which formed the basis of a new Securities Act in Ontario and subsequently in other provinces.

Crawford shifted from law to business in 1985, becoming president and chief operating officer of Imasco Ltd. in 1986; and chairman, president and CEO in 1987. He retired as CEO in 1995 and as chairman of Imasco Ltd. in 2000. He then rejoined Osler as Counsel.

As his Wikipedia entry attests, Crawford was everywhere: “He was the chairman of the Atlantic Institute for Market Studies (AIMS), chancellor of Mount Allison University and chairman of AT&T Canada. He was a corporate director for Canadian National Railway and was a member of the board of the Maple Leaf Foods as well as governor of the University of Waterloo.”

Most memorably for Canadian dealmakers, Crawford chaired “the Pan-Canadian Investors Committee for Third-Party Structured Asset Backed Commercial Paper; was the former chair of the Five-Year Review Committee appointed to review securities legislation in Ontario and was also the chair of the Securities Industry Committee on Analyst Standards … In 2000, he was inducted into the Canadian Business Hall of Fame and named Ivey Business Leader of the Year.

Horner inherited the legacy of Crawford, absorbing much of it side-by-side. If practising corporate law is really about relationships, it starts by the example of a mentor supporting a mentee: “Purdy Crawford would ask me to draft something, then he would revise it three times,” says Horner. “But when the client came, he would say, ‘look what Clay did. You should go directly to Clay’.” Crawford gave over files to Horner and others once he knew they would rise to the occasion. Horner has tried to emulate his example.  

Lexpert asked Horner: Within those relationships and on the deals, how important are ethics and can you teach them? Horner replied, “Ethics cannot be underestimated; they are so important. Firm leaders need to teach them – and embody them – and every lawyer needs to learn them. Professional responsibility and a client-first ethos must always take priority over firm or individual self interest.”

This becomes critical, he explains, especially when a lawyer makes a mistake. Horner modestly tells of an early mistake in his own career, the kind where he “couldn’t sleep for two nights” and then told the client, who might never have discovered it otherwise. “The importance of owning up to a mistake is critical. You shouldn’t carry that burden on your own. If you don’t own up, the mistake may become more difficult to correct. Besides, it’s just plain wrong.”

HORNER TOOK TO heart the matters of law firm leadership and broader community contribution. He is a former Co-chair of the firm. He was also pleased to lead on the establishment of its first Strategic Plan, citing its importance in everyone pulling together in the firm, on the team. And he made the celebration of the firm's United Way giving totals one of the three special moments in the firm's annual calendar.

One lesson new lawyers might take from Horner is to make time for a passionate interest outside of law. In Horner’s case he is a passionate Standardbred Horse-Racing enthusiast. Having said that, he chairs the Woodbine Entertainment Group Board of Directors, which means he has built up good relationships there too.