Cannabis is becoming an earner for law firms
Corporate businesses seeing boom
The legalization of cannabis in Canada may have diminished the need for criminal lawyers, but it’s created a booming business for the country’s most prestigious corporate law firms.
The cannabis sector has seen 27 major deals worth $10.6 billion (U.S.) announced this year, according to data compiled by Bloomberg. Add in 127 stock sales worth $2.65 billion, and advice to clients on how to navigate a complex new regulatory environment, and it’s been a boon for Toronto’s biggest law firms, many of whom had regarded it with trepidation.
“I’ve never seen an industry start to dominate our practice in the way that this one has,” said Patricia Olasker, partner at Davies Ward Phillips & Vineberg LLP. “It’s unprecedented in the lifetime of most practicing lawyers.”
Davies ranks first among its peers for working on $5.8 billion worth of cannabis M&A this year, including advising Canopy Growth Corp. on Constellation Brands Inc.’s $5-billion (Canadian) investment in the Smiths Falls, Ont.-based pot producer.
Like many of Canada’s corporate law firms, Davies entered the sector because its traditional clients needed to understand the implications of recreational legalization on Oct. 17.
“It’s not so much that we sat down one day and thought, we need a cannabis strategy, but rather that our clients were getting into this space and so they dragged us there,” Olasker said in a phone interview. “Our work is coming from conventional sources, but addressing this new industry.”
It was a similar story at Osler, Hoskin & Harcourt LLP, which advised Constellation Brands on the Canopy deal and was the bankers’ counsel for Tilray Inc.’s initial public offering, the first and so far only marijuana IPO on a major U.S. stock exchange.
That work came through Osler’s existing relationship with Constellation Brands and Cowen Inc., which acted as the sole U.S. book-running manager for Tilray’s IPO. Osler is tied for second place with McCarthy Tetrault and Sullivan & Cromwell LLP, advising on $3.6 billion worth of deals this year, according to Bloomberg data.
“We’ve seen a number of very interesting opportunities presented to us because of our involvement in those high-profile transactions,” said Rob Lando, a partner at Osler with a focus on cross-border legal services.
Other law firms were more proactive about developing cannabis practices. McCarthy Tetrault started investigating the industry after Justin Trudeau, who had promised to legalize marijuana, was elected as Prime Minister in 2015.
McCarthy’s goal was to pre- pare its traditional clients like banks and retail landlords for the day they realized they were part of the sector too, said Awi Sinha and Matthew Kelleher, partners at the firm.
For example, “one of the largest retail landlords across the country” got a call from one of their security guards who asked what to do with someone who lit up a joint in a smoking area and had a prescription for medical cannabis.
McCarthy helped the firm develop rules for all their facilities across the country, but also opened them up to the possibility of becoming a landlord for legal pot shops.