Below is the introduction of Elephants in the Room Part I: The Big Four’s Expansion in the Legal Services Market. The full report is available on the ALM Intelligence website.
The Big Four’s recent expansion into the legal market is not the accounting industry’s first foray into providing legal services. Throughout the 1990s, the big accounting firms expanded aggressively from their traditional audit business. After a decade of investment and expansion, the Big Five, as they were then known, built legal arms which rivalled the scale of the biggest law firms. Despite their early success, their ambitions in the legal industry were thwarted by a series of scandals and ensuing regulation, which exposed the potential conflicts of interest stemming from mixing audit with legal advisory services.
The first section of this paper examines the prior expansion of accounting firm into the legal market – a period from which accounting and law firms can learn valuable lessons. The second section looks at the current state of the Big Four in today’s global legal market. Accounting firms have learned valuable lessons from their prior misadventures in the legal industry. They are approaching expansion more cautiously and are using more sophisticated business models that combine traditional aspects of legal services delivery with newer methods. This strategy, combined the Big Four’s relationships with large clients, have allowed the Big Four to penetrate many areas of the legal industry and, once again, rival the largest law firms in the world.
Despite their many advantages, the Big Four’s success in the legal market is far from guaranteed. Regulators outside of the United States could reverse their current laissez-faire approach to managing the Big Four’s expansion into the legal market. Corporate clients could resist the accounting firm’s attempts to move up market. Law firms, which appear much more prepared to compete this time around, could even outmaneuver the Big Four. An accompanying paper, Elephants in the Room Part II: The Future of Big Four in the Legal Market, assesses the Big Four’s prospects in the legal industry and examines three possible scenarios for their further development.
The expansion of the Big Four into legal services has the possibility to transform the global legal market. In pursuing growth, the Big Four should move cautiously to avoid potential regulatory conflicts. Law firms, on the other hand, must prepare for a significant increase in competition and retool the way their businesses are run.
Download the full report here
Nicholas Bruch is a Senior Analyst at ALM Legal Intelligence. His experience includes advising law firms and law departments in developing and developed markets on issues related to strategy, business development, market intelligence, and operations. He can be reached by Email, Twitter, or LinkedIn.