The Big Four’s recent expansion into the legal market is not the accounting industry’s first foray into providing legal services. Throughout the 1990s, the big accounting firms expanded aggressively from their traditional audit business. After a decade of investment and expansion, the Big Five, as they were then known, built legal arms which rivalled the scale of the biggest law firms. Despite their early success, their ambitions in the legal industry were thwarted by a series of scandals and ensuing regulation, which exposed the potential conflicts of interest stemming from mixing audit with legal advisory services.
The first section of this paper examines the prior expansion of accounting firm into the legal market – a period from which accounting and law firms can learn valuable lessons. The second section looks at the current state of the Big Four in today’s global legal market. Accounting firms have learned valuable lessons from their prior misadventures in the legal industry. They are approaching expansion more cautiously and are using more sophisticated business models that combine traditional aspects of legal services delivery with newer methods. This strategy, combined the Big Four’s relationships with large clients, have allowed the Big Four to penetrate many areas of the legal industry and, once again, rival the largest law firms in the world.
Within 10 years, the Big Four could easily become the largest players in the legal industry. Law firms – and alternative service providers – should be preparing for that scenario.
- The legal arms of the Big Four are larger than many law firm leaders are willing to admit. Currently they average 2,200 lawyers in 72 countries. That puts them on par with the largest law firms in the world.
- Law firm leaders are waking up to the threat the Big Four pose. Sixty-nine percent of law firm leaders reported the legal arms of the Big Four as a major threat.
- The Big Four are investing heavily in fast growing emerging markets. Seventy-six percent of their lateral hires in the legal industry, since the start of 2016, have been in Asia or Latin America.
- The Big Four have penetrated many lower value practice areas and are expanding rapidly into high value areas such as M&A.
- The Big Four are investing heavily to create a range of “managed legal services” which looks more similar to the offerings of alternative legal service providers than traditional law firms.