As the Big Four accounting firms continue their long-anticipated foray into the global legal market, it’s the independent law firms in medium-sized markets—not the global heavyweights—that have the most to fear, according to a recent report from the president of the Association of International Law Firm Networks.
But AILF president Stephen McGarry isn’t a disinterested observer. He says these firms can counter the threat through getting involved in legal networks, facilitated by a database he founded that links a number of these networks.
In an analysis titled “Lawyers and Accountants—Professional Services Disruption,” McGarry argues that while concern over the Big Four’s eagerness to expand their legal services is merited, Big Law is largely insulated from the threat. He says that the Big Four would have to invest substantially to dislodge these firms from their market-leading positions in major global cities.
The Big Four are slowly moving beyond tax-related legal activities, eyeing a range of practices that could include employment, immigration, international arbitration, cybersecurity and data privacy, and even private equity. Still, they will find it easier to grow in smaller markets where they’ve been entrenched with their auditing services for decades and have a clear brand name, McGarry maintains.
“It’s a no-brainer in that there’s no resources that are required to be in those markets,” McGarry said, pointing to countries like Hungary, Chile and Venezuela.
He argues that because the Big Four’s operations in individual countries function as independent entities, the coordinating entity at the top could urge each local affiliate to bring aboard, say, five employment lawyers.
“Overnight, they have 500 labor lawyers in 100 countries,” he said. “The local firms are doing the hiring, the firing, and taking care of these lawyers. That’s totally different from Big Law.”
McGarry doesn’t discount the possibility of the Big Four making a move in a major market like London. But doing so, through a merger with a midsized firm, would require far more resources. To do the same in the U.S. would also require a significant (and for now, unlikely) regulatory change.
To a degree, Deloitte UK’s recent deal with U.S.-based immigration law firm Berry Appleman & Leiden helps prove his point. While growing via a merger, Deloitte added a smattering of legal resources in eight different countries: the U.K., China, South Africa, Mozambique, Dubai, Australia, Singapore and Brazil.
Local firms in some of these smaller markets face the sharpest threat, according to McGarry. They’ve likely long been members of “non-branded” international networks, like TerraLex, Meritas and McGarry’s own Lex Mundi. But now they will find themselves competing for talent and clients against the Big Four—with their globally recognizable brands—as well as vereins like Dentons and DLA Piper.
McGarry’s answer to the threat isn’t shocking, and he’s made it before: He points to his online database, LawyersAccountants.com, which links 70 legal and accounting networks with member firms in 160 countries.
He says that gives attorneys, and members of the public, access to 300 to 400,000 attorneys around the globe in seconds. Then, they can immediately put out a request for qualifications to all vetted firms in a given market.
McGarry argues that the referral database bests the network offerings of both the Big Four and the vereins. With the former, there are still four separate networks to scour. And with the latter, there’s little quality control, he asserts.
“The networks have to individually vet their members annually,” he said. “On average, networks have been in place for 25 to 30 years, so they at least know each other for years. Unlike vereins, which are just tacking on new units.”