The Big 4 global accountancy behemoths, PwC, EY, Deloitte and KPMG are in the midst of a re-invigorated push into law, in a cycle which has ebbed and flowed over recent decades.
As their internal legal teams continue to grow, it has become clear that this time the push is showing no signs of abating. What will this mean for Big Law?
Accounting firms have had several forays into the legal industry – in the 80s they began offering non-audit consulting services, and in the 90s they started introducing entire legal arms. By the noughties, most legal teams of the major accounting firms rivalled mid-tier law firms in size.
After the collapse of Enron in the US, restrictions were placed on auditing companies and their ability to provide non-audit services for their clients, and the Big 4 downsized their legal services. However, by the early part of this decade, the Big 4 were moving back into the legal playing field and rebuilding their legal arms, this time branching out far beyond their original playground of tax law.
Deloitte now has around 1,700 legal professionals, which would rank Deloitte Legal 21st on The American Lawyer’s Global 100 list.
“Deloitte is focused on creating the premiere global law firm with the goal of realizing independent legal practices in over 100 countries by 2020,”
...a Deloitte spokesman told Julie Triedman from law.com.
PwC claims more than 2,500 lawyers, which would rank them 9th on the Global 100 list.
"We are focused on premium integrated legal services. It is very attractive for lawyers who want to combine what they do with our deals, infrastructure, tax and consulting services,"
...PwC Legal Services leader Tony O'Malley told AFR in June.
The Big 4 have begun bundling legal, tax and advisory services to provide more comprehensive offerings to their clients. These internal legal contingents now have some of the biggest legal teams in the world, rivalling Big Law, and have expanded globally beyond the western world. Deloitte and EY have both exploited a loophole that allows them to offer legal services in China, which international law firms are not currently able to do.
As their momentum continues to grow, they’re not being shy about their legal arms – their legal services are displayed prominently on their websites, they’re poaching from top tier law firms and applying for alternative business licenses.
“Law firms should be afraid, very afraid”
...legal consultant Colin Cameron told Canadian legal publication Law Times, adding:
“We’ve all been waiting for it, and now it seems like the accountants are finally making their move.”
Will the mid-tier firms follow the Big 4?
There has been little evidence of smaller firms following in the footsteps of the Big 4, but with digital disruption transforming the industry and creating an increasingly competitive market, new sources of income are highly desirable.
Many mid-tier firms are under pressure to expand their offerings and provide a broader range of financial services and advice.
Mid-tiers looking at ways to increase their value proposition and diversify their business in order to stay ahead of the game, may begin to test their capabilities in the legal market too.
What does this mean for Big Law in Australia?
Law firms have been slower to expand their services, but are beginning to brace, as the Big 4 poach more and more top legal staff, and encroach further upon their territory.
Marc Totaro, analyst at CBA, noted that despite the accounting firms making some pretty big moves to expand their legal offerings, there has been little or no response from the top legal firms.
Big Law has slowly begun seeking ways to expand their services and push into non-legal sectors, but not at the same rate as their accounting counterparts.
Is the Big 4’s current push into the legal market simply another peak in a long-term cycle of expansion and contraction, or will their reach simply continue to grow from here?
Reference articles:
Deloitte, Other Accounting Giants, See Legal Services Growth
