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Legal market expert predicts that Big Four accountancy giants will challenge top law firms

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The legal teams being assembled by bean-counter megafirms could shake-up the law

Big4

The Magic Circle could be forced to go head-to-head with the Big Four as the accountancy giants’ successful entry into the legal market sees them gradually target higher level work.

The prediction by respected legal market analyst James Tsolakis, the head of legal services at RBS, will leave corporate law firms looking nervously over their shoulders as three of the Big Four bulk up their legal services arms after gaining alternative business structure (ABS) licenses .

So far, the move into providing legal services by KPMG, PwC and EY has seen the trio focus on less glamorous areas of law that fit with their core accountancy practises. Tsolakis, writing in his annual review of the legal market, puts it like this:

For now, their strategy is to eschew full-service capability and the trophy hires of rainmaking partners from established firms. Instead, they are focusing on legal areas that complement their own practices, such as compliance, due diligence, employment, immigration and tax.

In doing so, the new Big Four legal teams have grown fast. For example, since receiving its ABS license last December, EY has already built a UK legal services team containing 30 lawyers. The plan is to grow by 100% over the next 12 months and continue to grow beyond that period.

Meanwhile, PwC, which also has ambitious growth plans, has disclosed that it pulled in £41 million of legal services revenue last year. That’s less than half of what a typical mid-tier law firm generates — Shoosmiths, for example, turned over £93 million last year — but it’s still very much early days for the bean-counters.

The next phase envisioned by Tsolakis, once the Big Four have become established in their core legal areas, is a bid to climb further up the food chain towards the high end work favoured by the magic circle and other top firms. He explains:

The smart money … is on the accountants going head-to-head with the established legal order over lucrative capital markets and transactional activity once they have taken sufficient market share from the mid-tier.

But there is a catch to all of this that could yet shatter the Big Four’s legal market domination dreams. Mid-tier law firms, which endured such an awful few years after the financial crisis that some predicted their permanent demise, are back with a bang. Having bedded in a round of painful mergers, their collective revenues are up by almost 14% this year in a comeback that Tsolakis describes as “little short of spectacular”.

Much will now depend on how successfully these firms use technology over the coming years in a segment of the legal profession that is becoming ever more commoditised. The Big Four is strong in this area, having invested heavily in process outsourcing.

Another factor that the law firms will have to contend with is the strength of the KPMG, PwC and EY brands — which appeal to students. Last week’s announcement that EY is launching a law training contract received lots of interest from wannabe lawyers, with our report of the news receiving almost 10,000 views and nearly 700 Facebook shares.

Even though they are recovering, mid-tier law firms struggle to generate this sort of interest. But the Magic Circle and other mega law firms retain the capacity to excite the young. It is in this elite segment of the market that this battle will be most interesting — when it eventually gets going.

19 Comments

Anonymous

Hasn’t this been predicted for quite some time? Why are you reporting this like it’s such big news?

(1)(7)

Not Amused

It would be nice if, for once, we had a prediction that hadn’t also been made 30 years ago …

(2)(0)

Really?

From predictable Proudman, to repetitive rhetoric! Come on Legal Cheek, is this where you’re pitching legal journalism? Really?

Surprise us!! Tell us something we’ve read little or nothing about.

(5)(0)

Big Sue

*Insert mum joke here*

(1)(0)

little sue

I entered your mum. She loved it.

(4)(0)

medium sue

I inserted something into both your mums

Lolsies

(2)(0)

JD Ballah

Nobody can beat Jones Day – we’ve got the biggest dicks in the City, we’re super-profitable and I pocket £80k as an NQ. U mirin brahs?

(8)(0)

Anonymous

Fairly average pay by U.S. standards. Having met some of you, you do seem to have the biggest dicks, though.

(1)(1)

Anonymous

You’re male, aren’t you? 😉

(0)(0)

Anonymous

I think you may have misinterpreted that post…

(1)(0)

Anonymous

Just checking x

(0)(0)

Anonymous

Isn’t that one of the poly US firms? They’re all just MC rejects anyway.

(4)(0)

JD's Brawler

£80k buys a decent watch nowadays.

Do you have a second job for your real money?

(2)(1)

Anonymous

Please, £10k more a year doesn’t make up for the fact that you’re championship and we’re premier league.

Come back when you work for skadden or SullCrom.

(3)(2)

Anonymous

if the pay is as appalling as for the rest of Big 4 employees, no chance the legal departments will take off.

(2)(0)

Inquisitor

700 shares…

(0)(0)

Anonymous

This article reads like a sponsored piece.

Listen, going forward there will be 2 types of private law firms:

(1) The monster. 2000+ employees.
(2) The boutique and high street. 10-20 employees.

Those in the 200-400 size firms will probably join one of those types. The rest will work for insurers, banks, in-house and the likes of the Big 4 accountancy companies.

(2)(0)

Anonymous

That’s a very confident prediction.

I’m not so sure that size is directly relevant. I think that some of the very largest firms (DLA, Dentons) should be very worried by the Big Four, while some mid-size specialist firms could thrive as long as they own their niche.

To be fair, you did not say that size was what matters. But if it isn’t, then I think we need to be careful about predicting that firms will stratify themselves so cleanly by size.

(1)(2)

Anonymous

The only reason we’re all reading this is because we’re trying to find a TC & begging just doesn’t cut it. Stop pretending you all have offers from Bakers, A&O and White&Case but you’re just spoilt for choice, and came here to laugh off a decent opportunity.

(2)(0)

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