Sofia Lind finds that a second merger in Canada looks like a neat fit for Norton Rose's global ambitions

Coming barely four months after it formally merged with Canada's Ogilvy Renault, last week's announcement that Norton Rose had sealed a second tie-up in the country led some rivals to question why the firm needs 700 lawyers in a nation that was until recently ignored by international law firms.

But while Calgary-based Macleod Dixon – which will unite with Norton Rose's existing Canadian operations under a new Norton Rose Canada banner in January 2012 – may not have the same brand recognition outside Canada as legacy Ogilvy, closer scrutiny shows the union with the 250-lawyer practice fits rather neatly with the City firm's practice and global ambitions.

With an emphasis on the busy mining and energy sectors, which have remained resilient markets for M&A activity despite the global downturn, Macleod has acted on many big-ticket international transactions in recent years and is well-regarded in its core sectors.

Key mandates include advising Opti Canada on a $2bn (£1.3bn) deal that saw the struggling Calgary-based oil sands developer acquired by state-owned China energy company CNOOC in July 
this year. The firm also took the Canadian role for Arcelor on its $33bn (£21.1bn) merger with Mittal Steel, creating the world's largest steel company back in 2006.

Equally as important as the established mining and energy client base, Macleod looks set to plug geographic gaps for Norton Rose both in Canada and several key foreign markets.

Norton Rose's first Canadian merger partner, Montreal-based Ogilvy, which rebranded as Norton Rose OR when its merger went live on 1 June, is headquartered in French-speaking Eastern Canada. And its Toronto and, in particular, its Calgary arm – a hub for lucrative oil and gas work – were in significant need of critical mass.

Meanwhile, outside Canada, Macleod fills the most notable gap in Norton Rose's international expansion outside North America – handing the firm its first offices in Latin America, where Macleod has well-regarded offices in Colombia and Venezuela.

The tie-up may also bring Norton Rose a presence in Brazil as Macleod has a joint venture with Rio de Janeiro-based Veirano Avogados. However, the Brazilian firm has not yet made a decision on whether it will sacrifice international referral work from firms including Clifford Chance in order to join Norton Rose.

Elsewhere, the merger will also bring Norton Rose a small office in Kazakhstan, as well as a team of lawyers in Moscow. These lawyers will transfer across to the Norton Rose LLP, while those in Canada and South America will merge fully with Norton Rose Canada which, like existing operations in South Africa and Australia, will remain a separate profit pool under a Swiss verein structure.

The deal also builds upon the rapid expansion of Norton Rose since the firm in 2009 unveiled a tie-up with 146-partner Australian firm Deacons and then in November 2010 announced mergers with Ogilvy and South African leader Deneys Reitz. The UK firm has made no secret of its ultimate aim of securing a credible US tie-up.

Norton Rose Group chief executive Peter Martyr (pictured) tells Legal Week: "This [combination] is a perfect fit, in particular in the energy and mining resources space. Obviously we had been talking for some time – six months – but it was really an easy merger to agree upon. These are well-developed offices that slot in nicely to our international practice. It also gifts us a Latin America presence that we really wanted."

Logical step

On paper the deal looks equally favourable for Macleod, where the draw to merge was not just about international reach but also expanding in Canada. While the firm is sizable in Calgary with over 160 lawyers, its Toronto office has fewer than 50 lawyers and it completely lacks coverage in Eastern Canada.

As such, says Macleod managing partner Bill Tuer, it had kept a close eye on legacy Ogilvy Renault for some time, with its merger with Norton Rose making a tie-up even more compelling. He comments: "This was the logical next step for us, as our clients are getting increasingly international while we also needed the coverage in Eastern Canada. It was a no-brainer for how we complete one another in Canada and internationally."

However, despite winning plaudits, the way the merger has been handled internally has drawn criticism from some within the London limited liability partnership (LLP) as it was only voted on by partners in Canada and at the level of the Norton Rose Group international executive.

One Norton Rose partner comments: "I'm sure many partners think it's a good move but since the announcement some have questioned why this was necessary, why we could not just merge with one Canadian firm with the right coverage."

While this latest tie-up has been received as a logical addition to the Norton Rose Group, a wider challenge could be keeping its core UK partnership on side as the firm continues its rapid global expansion.

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Norton Rose Canada

Established: 1 January 2012 through merger of Norton Rose OR and Macleod Dixon

Managing partner: John Coleman

Lawyers: 700 in Canada plus around 60 in South America

Key practices: Energy and natural resources, financial institutions, international arbitration, corporate and commercial

Key clients from Macleod Dixon: Imperial Oil, Haliburton, Chevron

Key clients from Norton Rose OR: Bombardier, SNC Lavalin, GlaxoSmithKline, Cirque du Soleil

Key shared clients: Royal Bank of Canada; Toronto-Dominion Bank; Petro Canada (now Suncor Energy); Bell Canada.

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Reaction from Canada

"It appears to be a positive move for them and we see them both as great firms. We see this as yet another indication of the strength, vibrance and importance of the Calgary market." – Gary Rose, Calgary managing partner, Fasken Martineau

 "Macleod Dixon is a well-respected firm with a good profile in Calgary. It's been around for a long time and I can't imagine we'll see changes to the firm, besides the branding. It's interesting because Norton Rose already had a small office in Calgary. For us, then, it's just an example of more consolidation – two competitors becoming one." – Ken Mills, Calgary managing partner, Blake Cassels & Graydon

"The first merger, with Ogilvy, gave Norton Rose a strong base in Montreal with a number of outward-facing clients but no energy practice and a barely open office in Calgary. The second merger, with Macleod Dixon, will give them a strong energy practice and a good office in Calgary. It's a good move for them – filling those gaps from the first merger." – Managing partner at a leading Canadian firm