Value of deal for Vancouver firm includes $26 million, taking on $16 million debt
In a rarity for law firms in Canada, Vancouver-based Whitelaw Twining will become part of a publicly traded company, as London, UK-based DWF Group announced plans this week to buy the insurance defence practice for $42 million.
“Joining forces in this way with the DWF Group is simply the next step in our firm’s evolution,” says Whitelaw Twining Country Manager Dan Shugarman. “It gives us the ability to offer clients and the public a broader range of services.”
Whitelaw Twining is a full-service litigation firm specializing in insurance, focusing on defence, commercial litigation, personal injury and dispute resolution.
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Shugarman adds that the limited liability partnership will continue with all 16 of Whitelaw Twining’s pre-deal partners, along with the addition of a new partner. Whitelaw Twinning has 200 employees in its Vancouver and Calgary offices, having grown over the past 40 years from a three-person practice in Vancouver to a litigation law firm serving clients in 17 languages.
The acquisition also “enables us to draw on DWF Group’s experience to become more responsive to our clients and our people from an environmental, social and diversity perspectives,” Sugarman says. “We believe it will allow us to become leaders in this regard.”
Shugarman noted that clients in the insurance space are “demanding far greater transparency, higher levels of cyber security in some cases akin to the likes of what is required amongst defence contractors and stringent regulatory compliance such as GDRP and ISO certifications.”
In terms of drivers for change, he notes the market is demanding this. “At the end of the day, the protection of the public and our clients is paramount. These changes are going to ensure that level of protection is present.”
In a country where strict rules by law societies require lawyers to control and manage the delivery of legal services, DWF’s deal to acquire Whitelaw Twining has been arranged so that it does not run afoul of these regulations.
Under the terms of the transaction, a partnership will be established in BC to provide legal advisory and connected services through WT BCA LLP, operating as Whitelaw Twining. DWF’s existing loss-adjusting practice in Ontario, DWF Adjusting (Canada) Ltd. Individual lawyer professional corporations and DWF Adjusting (Canada) Ltd will be WT BCA’s shareholders.
In addition to Shugarman, Whitelaw Twinning’s management team includes Kim Wigmore, head of business development, and Michael Silva, head of operations.
The Law Society of British Columbia issued a “no-action” letter following the transfer of Whitelaw Twining’s business and clients to the partnership. “Whitelaw Twining will be dissolved, and the former partners of Whitelaw Twining will form a BC limited liability partnership with DWF Adjusting (Canada) Limited under the name of WT BCA Limited Liability Partnership,” the no-action letter says.
“WT BCA LLP will provide legal services, with a focus on insurance and commercial litigation, as well as claims management and adjusting services to clients of the partnership.
DWF will not own or operate Whitelaw Twining going forward, and the existing business of Whitelaw Twining will carry on in WT BCA LLP under the conditions established by conditions set by the law society.
A relationship agreement will also be drawn between DWF and Whitelaw Twining’s existing Alberta practice, WT LLP.
UK-based DWF has an extensive legal practice, but it also offers other business services. The expanded capabilities Whitelaw Twining can take advantage of include artificial intelligence high-volume document review, data network security, and integrated insurance claims management and adjusting through DWF’s Barnescraig & Associates, which has offices in Toronto and Vancouver. DWF acquired Barnescraig in 2021.
DWF operates directly or through association in 19 countries. It says that Whitelaw Twining’s revenue for 2021 was $34.5 million. Pro forma Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) was about $5.3 million, adjusted to reflect DWF’s partner compensation and reporting policy. Whitelaw Twining’s gross assets on Dec. 31, 2021, were $21.6m (£12.6m).
The acquisition value is £27.7 million (about $42.6 million) with a maximum consideration of up to £16.9 million ($26 million) payable in shares and cash and the assumption or repayment of debt of £10.8 million ($16.8 million).
Initial consideration of an estimated $17.8m (£11.5 million) in newly issued DWF shares will be paid on Jan. 3, 2023, with $4.4 million cash (£2.9 million) distributed in February 2023. Contingent share consideration of up to $3 million is also on the table, provided Whitelaw Twinning meets specific 2022 calendar year financial targets.
DWF said it expected the acquisition, set to complete by the end of 2022, to enhance earnings in the first full year of ownership.
In a news release, Sir Nigel Knowles, Group CEO at DWF, said that the acquisition represents “a high-quality opportunity for our clients as DWF Group enters the Canadian legal market.” DWF plans to build “on the synergies available through our existing Connected Services and Mindcrest capabilities in North America.”
He added that there is a “strong cultural fit” with the Whitelaw Twining management team. “Their emphasis on collaboration over competition and on creating a progressive, innovative, and supportive working environment reflect our own ‘one team’ culture.”
The law society’s “no-action” letter to Whitelaw Twining partners comes under the regulator’s Innovation Sandbox program.
In 2020, the BC law society’s Futures Task Force recommended allowing for innovation in legal service delivery and alternative business structures while protecting the public. The recommendations include looking at the current regulations and restrictions on law firm ownership and investment and establishing a regulatory sandbox to allow innovations that may be illegal or unethical under current regulations to be piloted and evaluated in a controlled environment.
The “no-action” letter issued to WT BCA LLP sets out several conditions consistent with the society’s current rules permitting multi-disciplinary practices. It states, “the lawyer partners of WT BCA LLP must have actual control over the delivery of legal services and must be able to exercise independent professional judgment and take any action necessary to comply with their obligations” under the Legal Profession Act, the law society rules and the BC Code.
The lawyer partners “must also take steps, including the implementation of screening measures, if necessary, to ensure that no improper disclosure of privileged or confidential information is made to any person, including a person appointed by the regulatory body of another profession in relation to the practice of another partner or employee.” If the lawyer partners fail to meet any of the conditions in the letter or engage in conduct that “presents a risk of harm to the public or undermines the integrity of the administration of justice, the Law Society may take action.”
Says Shugarman: “So it’s not so much the structure that drives this combination but rather the clear alignment of the two entities culture, values, and client base.”
He adds, “at its core, this partnership allows us to work with people we know share our values and culture to better serve an ever-expanding client base.”
It will also give “greater access to international referrals [that] have already started and enhance the organic growth we were already seeing amongst our overlapping client bases.” There has long been such an overlap, Shugarman says, with DWF and Whitelaw Twining providing the same clients with different services.
A new share program will help “incentivize” employees of Whitelaw Twining, Shugarman says.
“As a part of the DWF Group we will extend the benefits of our future growth and success to all employees. Our clients will continue to receive independent advice and support from the same legal professionals they’ve come to trust, with deeper bench strength and capabilities behind us.”
The particulars of that compensation are still developing, but it is expected that about $800,000 will be payable to Whitelaw Twining employees by Dec. 31, 2022.