‘How can X law firm remain relevant in an increasingly competitive legal industry?’ This is a question that every training contract applicant has come across at least once in their application history. As law firms globalise and implement the latest technologies into practice, competition between firms only increases as they scramble to retain and obtain a wide range of clientele. This competition has increased as the Big Four professional services firms throw their hats back into the legal ring, making the same advances in technology and offering a more affordable service. These Big Four firms are KPMG, Ernst & Young (EY), PricewaterhouseCoopers (PwC) and Deloitte. They are globally renowned accounting firms and if, as a law student, you hadn’t heard about them before, you surely are hearing about them now. While some law firms have concluded that the Big Four pose an imaginary threat, this article discusses the fact that this threat is real and growing. As an applicant or trainee, it is important to be aware of this competition and be clear on how this may affect the shape of the legal industry in the future.
Before delving into the threat that is posed, it is important to briefly address the history of the Big Four in law. The legal competition from the Big Four is hardly a recent threat as the Big Five (including the former accounting giant Arthur Andersen) caused a stir within the legal market throughout the 1990s. The firms offered an integrated business model that boasted of the possibility of a ‘one stop shop’ for clients who could obtain audit, accounting and legal advice from the same firm. This offering was convenient for clients and had a vast amount of potential for success had the Enron Scandal not taken place. The scandal seemed to halt the progress of the Big Four in law but that was not the true picture as all it did was force the remaining four accounting firms to rethink and develop their strategy for the opportune time. That time is now.
With each member of the Big Four, this article will make reference to a development that illustrates a visible threat and indicates why law firms should be afraid of the ‘Big Bad Four.’ Firstly, Thomson Reuters’ decision to partner with KPMG on the implementation of its recently acquired cloud-based platform, HighQ, warns of serious competition. High-Q is designed to optimise productivity for legal departments through automated workflows, simplified contract management and secure collaboration. As KPMG and the rest of the Big Four embrace technological advancement in legal practice and continue to steer world class consulting and auditing practices, they present themselves as forces to be reckoned with within the legal market. Secondly, we make reference to EY who acquired Riverview Law in 2018 and have continued to use it to offer cheaper alternatives to outsourcing from traditional law firms for their clients. Whether a client company is part of the FTSE 100 or not, cost is a major consideration. The lower cost offered through the Big Four is a clear advantage, especially if the clients already receive alternative services from a member of the Big Four.
If those two aren’t reason enough to show the threat is growing stronger, turn your attention towards PWC, a legal giant in its own regard. PWC secured its alternative business structure licence in 2013 which established PWC Legal. The firm has showcased the greatest advantage of legal practice by the Big Four in that they can perform all the tasks needed for a single acquisition. Last but definitely not least, we shift our gaze to Deloitte, which was the last of the four to obtain its alternative business structure licence in 2018 and has now taken on its first cohort of trainees beginning in 2020. This trainee intake symbolises the growth of purely legal practice within the firm that is separate from their Tax and Legal consulting departments. The firm has also shown its commitment to being significant players in the legal market by ensuring that they employ the best in practice. Their most strategic appointment was that of former Allen & Overy banking partner, Michael Castle as head of Deloitte Legal UK & North South Europe in 2018.
Before we conclude we must reflect on whether this threat is fundamentally as big as the Big Four indicate or whether this is healthy competition that will make traditional law firms operate at a higher innovative and cost-effective rate. It is suggested by many lawyers that it is the latter. They argue that if there is any threat, this will be to mid-tier firms as the larger international and magic circle firms are ‘safe’ because of the weight of their reputations that precede them and the long-standing relationships that they have built with their clients. Anne Kimmitt, former EY managing partner and CEO at Minter Ellison, one of the big six Australian law firms indicates that law firms have the advantage that they are trusted by their clients because they are not too diverse. She goes on to expand on the fact that the scandals that surround accounting firms have not been forgotten by clients and they would rather trust the traditional models during unprecedented times, such as the COVID pandemic. If law firms can capitalise on this and build up more than just their legal skills, expanding in technology to ensure efficient and cost-effective services, the threat of the Big Four may conclude as simply imaginary.
Despite the arguments that indicate there is not much to be weary of, this article concludes that, at least for now, the threat of the Big Four is real and unimagined. The diverse practice offered by the Big Four is more of an advantage than a threat because of the reduced cost and access provided to a range of diverse platforms. In addition, to counter the argument of the lack of trust surrounding the Big Four, scandals are not exclusive to the Big Four as many major scandals in this decade have in fact surrounded players within our trusted traditional law models. As times goes on and clients show their preference, we are sure to see whether this threat really is a figment of our imagination.