Big Four set sights on legal services

The legal sector has not been about only law firms for a long time. Between alternative service providers, outsourcers and all manner of legal businesses, the new industry lexicon has stretched — and in the process become the domain of the Big Four accountancy firms.

Deloitte, PwC, EY and KPMG’s enthusiasm for the legal industry has waxed and waned since the firms first made their push into the law 25 years ago with top law firms in their sights. But the legal market has shifted dramatically since that time, while the Big Four’s ambitions to tackle law firms head-on have diminished.

The market is increasingly competitive: the UK’s magic circle firms have expanded globally, the mid-market has become crowded and US firms have muscled their way in to the City of London.

The core of the Big Four’s legal strategy remains the same, however — to provide services focused on solving business problems. What has also emerged inside the Big Four legal practices is a focus on using technology to make legal advice more efficient, and to capitalise on improving the functioning of in-house legal teams through “legal operations” services.

“It’s a really big market . . . and it’s growing quickly,” says Juan Crosby, partner at PwC.

The alternative legal service providers’ business model is that not everything that is done by an expensive law firm needs to be done by an expensive law firm — but there are limits to that

The Big Four were not the first to use tech­nology to deliver legal services more efficiently. Axiom, one of the pioneers in supplying lawyers to companies on demand 20 years ago, developed Axiom Managed Solutions to undertake high volume work that could be partly automated, and Knowable to work on contracts in which no legal knowledge was needed at all. UnitedLex, which describes itself as “the world’s leading enterprise legal services provider” was founded in 2006.

Through a number of high-profile moves over the past two years, the Big Four have ramped up the assault on the legal services industry with technology at the forefront of their approach.

When it comes to alternative legal service providers, says Michael Castle, the ex-Allen & Overy partner who heads up Deloitte Legal, “their business model is that not everything that is done by an expensive law firm needs to be done by an expensive law firm”. They unbundle legal services, he says: “But there are limits to that, because they can’t provide legal advice.”

Mr Castle is summing up Deloitte’s approach, but his words could just as easily describe that of the others, when he says: “We will build out our legal capability credibly with market-leading lawyers who will deliver legal advice in a ‘tech-enabled’ way.”

Yet there are differences among the strategies of the Big Four, as well as their progress.

While others held back, PwC started early and made the most headway. When changes in UK law made it possible for legal-service professionals — “non-lawyers” — to own law firms, PwC was the first to secure its alternative business structure licence from the regulator almost six years ago. It now boasts more than 3,500 lawyers across 90 countries.

PwC has continued its expansion with NewLaw, a legal services business that promises to help companies “optimise [their] legal function”, and which counts the co-founders of Radiant Law, one of the legal technology industry’s most successful boutiques, as team members.

Others are now determined to catch up. EY has made two splashy acquisitions in the past 15 months, leapfrogging KPMG and Deloitte in an attempt to transform itself into a “leading disrupter of legal services”.

While PwC built a broad portfolio of legal services, EY has bet on so-called “legal managed services”, or taking grunt work off the hands of in-house legal teams.

In September 2018 EY bought Riverview Law. One of the most high-profile alternative legal services providers, Riverview’s pitch was that it helped free-up in-house legal teams at a fraction of the cost of outsourcing to traditional law firms. EY followed up the deal with the purchase of Pangea3, a legal managed services business, from Thomson Reuters.

“Two years ago there was a bit of a pivot,” says Chris Price, chief executive of EY Riverview Law. “Until then the strategy was ‘don’t just build another law firm’.” The focus was instead on building a legal capability that could be integrated into the rest of EY’s offering.

Then came the shift to focus on alternative providers of legal services. “[Existing alternative providers] hit on exactly the right service requirement for many of our clients but they’re too small . . . We can bring that scale,” he says.

KPMG is also expanding its services and has unveiled details of a new UK legal consultation service “to address the rapidly changing requirements of in-house lawyers” earlier this year, to add to similar initiatives in Australia, Germany and Switzerland.

Mr Castle at Deloitte says that while the pace of change is accelerating, “the tide is with us . . . You can do it at scale in a technology-enabled world”.

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