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Message: <blockquote data-quote="kitk" data-source="post: 5358" data-attributes="member: 157">5. Accounting Firms' Disruptions in the Legal Service Sector (By: Sara)The story:According to Legal Cheek’s article published last Friday, KPMG, one of the ‘Big Four’ accounting firms in the world, announced that it will increase the number of its lawyers to over 3,000 in the next few years. If it reaches this ambitious target, then it will become one of the largest ‘law firms’ in the world. Considering that Denton, the current largest law firm in the world, has over 9,000 lawyers and Linklaters and Allen & Overy, both part of the magic circle, have 2,100 and 2,800 lawyers respectively, KPMG’s target headcount forewarns traditional law firms of the possible—or even already initiated—upheaval in the legal sector.KPMG’s announcement is just one of the numerous changes accounting firms have been making in their business over the last few years to infiltrate the legal industry. EY, for example, acquired Riverview Law, a legal service firm, this September as part of their project to expand the global legal managed services. PwC currently has over 3,500 lawyers in 90 countries and its UK branch offers legal services in 13 different areas. It also opened a law firm, ILC Legal, in Washington DC last year. Deloitte’s legal network, which includes over 2,400 lawyers in over 80 countries, recently saw another local Singaporean law firm, Sabara Law, added to it. Some of these firms—KPMG and PwC—also offer training contracts (while EY used to offer training contracts, it announced that it has no plan to do so in the current cycle).These threatening business transformations of Big Four accounting firms could be said to be driven by their client needs and profitability. Many clients prefer to seek legal advices from the firm they obtain non-legal services because this leads to integration of, and thus more effective provision of, legal and non-legal services in certain corporate or commercial transactions. At the same time, ability to provide legal advices, especially in the areas of tax and corporate, can make these firms highly competitive because these are not something that traditional accountants offer.Impact on businesses and law firms:To businesses, disruption caused by big accounting firms in the legal market is good news. These firms will drive up competitions in the legal market, which is likely to lead to lower cost to clients. Downward trend in legal service cost is especially likely considering that the Big Four are investing hugely in technology in order to innovate their legal services and provide clients with more cost-effective solutions. Also, clients can enjoy benefits arising from the Big Four’s globally wide community of experts and strong consulting advisory capability when seeking legal advices from these firms.However, rise of the Big Four in the legal market is a nightmare to traditional law firms. According to a survey conducted by ALM Intelligence last year, 69% of law firms said that they see Big Four as their biggest competitors, more than the in-house law departments. Concerns shown by law firms are understandable because accounting firms already possess strong base to establish new legal service businesses and are effectively using them to compete existing law firms; they are already renowned professionals in the areas of tax, finance and M&A and are focusing on these areas of law to complement and strengthen their existing non-legal services provided to their existing wide client base. Law firms must develop strategies to survive the threat posed to their market shares and revenue by the Big Four.Some of the law firms are already preparing for the looming transformation of the legal market. For example, Allen&Overy surprised the consulting market by launching its own regulatory consultancy this summer, showing that Big Four’s disruption in the legal market is not a one-way attack. In addition to this, many of the law firms are joining the technology race by innovating their legal services to become more efficient and less costly. In regard to tax, law firms are not just advising on law but also other aspects of tax planning, such as financial and economic aspects to compete with accounting firms. Baker & McKenzie, for example, hired Mark Bevington, a former partner at EY and half of its corporate tax team consist of non-lawyers. As shown by these moves, in order to maintain competency in the market, traditional law firms would have to constantly develop their services to survive the increasing competition caused by the accounting firms.</blockquote>

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