Recent research from Said Business School at the University of Oxford shows that the accounting Big Four are fast increasing their collective share of the global legal services sector.
Here, Brian Murphy looks at the shift towards the legal sector from the likes of Deloitte, EY, PwC and KPMG, who have collectively increased their legal revenue to £1.25 billion.
Brian is a Manchester-based accountant and thought leader with decades of experience in the world of financial services, assisting businesses across the UK and Europe.
He writes about accountancy industry news and updates with an eye on sector-specific shifts.
The research refers, of course, to Deloitte, KPMG, PwC and EY as the ‘Big Four’ and shows an interesting shift in focus for global accounting.
Deloitte, EY, KMPG and PwC increasing share of global legal sector
Key findings from the research show that Deloitte, EY, PwC and KPMG are expanding their legal businesses rapidly and continuously globally. This is having the intended impact of increasing their sales revenue substantially and, of course, taking this income away from traditional law firms.
Data clearly shows how fast this encroachment into legal services is progressing.
In 2015, the Big Four (it’s worth noting that these four companies are now the biggest professional services firms in the world, not just accountancy), amassed $900 million from their legal departments. By 2017, this had increased to $1.2 billion and by 2021 it had leapt further to $1.5 billion (equivalent to £1.25 billion).
When did Deloitte et al first move into the legal sector?
While the Big Four first entered the legal services market back in the 1990s, there was no huge increase in revenue until around 2010. Since then, they have all massively increased their move into the legal sector.
This growth has been facilitated by rapid expansion into many different legal practice arenas. And, for the last few years, the shift has been so successful for the Big Four that they are increasingly competing with traditional and long-standing law firms around the world.
Strategic plans for the next few years to garner more legal work
Despite the rapid increase in revenue since 2010, the accounting firms have recognised that this began to plateau and level out. For example, the increase between 2019 and 2021 saw revenue go from $1.48 billion to $1.5 billion.
This represents a clear sign that the Big Four will be further expanding their bid to win more and more legal services contracts of all types.
Collectively, the four accounting behemoths are working to strategically gain more legal work and have been implementing strategies to further this collective ambition.
In order to keep pushing forward with the view to absorbing more of the work that traditionally went to law firms only, the Big Four are massively increasing their workforce of legal experts.
An increasing workforce of legal professionals
For example, EY has announced that it aims to triple the number of lawyers and legal services staff in Ireland and the UK over the next few years.
This move came hand in hand with EY’s plan to split most of its tax business into a separate advisory business (NewCo). This new business would consist of EY’s original advisory and consulting divisions. The plan was to leave only a few tax experts for AssureCo, which would be EY’s newly independent audit and assurance business.
This split would, in theory, allow EY to further expand its forays into the legal sector as it would free from various conflict of interest regulations that currently block the company from reaching audit clients.
However, the whole split between EY’s consulting and audit businesses is on hold as of 9 March 2023, as discussions continue regarding what will happen to the firm’s tax business.
Deloitte makes key acquisitions and appointments
Deloitte announced towards the end of 2020 that it planned to add 57 new lawyers and 29 legal partners in order to expand Deloitte Legal. Further acquisitions have been ongoing since then, bolstering the legal division of the firm.
For example, Deloitte has been adding a number of high level C-suite professionals from across the global legal services sector (international acquisitions) in order to expand its reach, experience and capabilities.
Emily Foges is lead manager for Legal Managed Services at Deloitte. She told lexisnexis.co.il that the firm’s… “… strategy I very much rooted in the needs of the client to be offered solutions and not just advice. The vision for Deloitte Legal has always been that you bring together high quality legal advice with legal management consulting, legal managed services and legal technology.”
This, Deloitte says, is how the firm intends to offer a complete end-to-end service to clients and help them achieve what they need. It’s about solutions rather than simply advice.
KPMG set to double legal business over the next 12 months
KPMG announced in May 2022 that the firm plans to double its legal practice in the UK by the end of next year (2024). This involves, according to the growth strategy announced by CEO Jon Holt, hiring 220 new lawyers. The new hires will include 45 new directors and partners.
For PwC, the legal expansion strategy includes boosting the salaries of newly qualified lawyers to £90,000/annum – around an £18,000/annum increase. Again, the firm has announced that it intends to double its legal services arm over the next few years.
This shows how the Big Four are competing for the kind of legal talent they need as well. By matching salaries offered by traditional law firms, the accountancy giants hope to be able to compete with their workforce.
It seems to be paying off for Deloitte et al, with those in the legal profession openly expressing interest in the opportunities provided by working for one of the Big Four.
Statistics show the changing face of global legal services
In 2022, 13% of law firms in the UK reported losing contracts to one of the Big Four, again showing that this shift is impacting the market in serious ways.
Over in the US, top law firms say that they are facing even more competition for work from the accountancy giants, with 24% reporting losing business to the Big Four in 2022 and experiencing trading difficulties.
Over in the US, there are signs that deregulation of the legal sector could open up yet more opportunities for accountancy firms to scoop up even more of the legal market.
Currently, laws in some states (including Florida and New York) act as a barrier for alternative legal services providers (ALSPs) such as Deloitte, EY, PWC and KPMG. If these states follow the changes made by the likes of California, Utah and Arizona, then the Big Four will be able to expand even more rapidly into the US market.
Brian Murphy Accountant
This guide was written by Brian Murphy, managing partner at a Manchester-based chartered accountants and forensic accounting firm. Brian specialises in litigation, corporate finance, finance raising, cost rationalisation initiatives, public interest assignments and commercial disputes. Brian Murphy has assisted numerous companies in all areas of accounting and financial reviews as an advisory partner.
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