PwC Legal’s decision to open a US office, in Washington D.C., has attracted significant attention. Some, in the legal press, have called it a “wake-up call” for law firms. Others have said the move is a “game changer” for the US legal market. Make no mistake, PwC’s recent move, is a big deal – just not for the reasons many think it is.

A new office, not a new strategy

In and of itself, the establishment of a new office by PwC Legal in the United States is neither particularly surprising nor is it market altering. As detailed in ALM Intelligence’s recent report, Elephants in the Room Part: The Big Four’s Expansion Into the Legal Market, the Big Four have been ehttps://www.alm.com/intelligence/solutions-we-provide/business-of-law-solutions/state-of-the-industry-research/elephants-in-the-room-the-big-4s-expansion-in-the-legal-services-market/xpanding rapidly into the legal market over the past decade. They have built legal arms which rival many of the biggest law firms and have penetrated deep into many major practice areas (see Figure 1). All of the details released on PwC’s new office suggest this status quo remains in place.

For example, the firm was careful to announce that they will not be advising on US law. It is a common misconception that Sarbanes-Oxley (SOX) prevents PwC, and the other Big Four players, from providing legal advice. It can do so under SOX regulations – just not to its audit clients. The firm’s decision to avoid providing US legal advice should be seen as a nod to regulators, and perhaps even to law firms, that the firm is not planning – at least for now – to expand the range of services it provides in the legal industry. Such an announcement would have signaled a major strategic shift.

PwC Legal’s most significant announcement, of course, was that they have established a US law firm and will be targeting US corporate clients. This is not a surprise to anyone who has been paying attention. PwC Legal has been targeting – and servicing – US clients for some time. The five-year deal they struck with GE earlier this year, to manage the accounting and legal aspects of the company’s tax department, is the most obvious example of this. But that deal is just the tip of a large iceberg. The truth is that PwC Legal’s new “law firm”, which will be focused on marketing and business development, is simply a formalization of what has been happening for years – a visible example of PwC Legal’s expansion, and the Big Four’s expansion, into the global legal market.

A new approach to expansion

One aspect of PwC’s announcement is new and important – the manner in which the announcement itself was made. Over the past decade the Big Four have been careful to not draw attention to the growth of their legal arms. To some degree, this was a lesson learned from their prior expansion in the legal industry. In the early 2000’s the Big Four expanded rapidly into the legal market and stated, with significant fanfare, that their ultimate goal was to compete directly with Big Law. The Big Four’s declaration of war against law firms was almost certainly a mistake. In response, law firms rallied the American Bar Association to their side. This, combined with the Enron scandal, ultimately led regulators to enact the SOX regulations which slowed the Big Four’s expansion into the legal market.

Having learned their lesson, the Big Four have spent the past decade expanding their legal arms quietly. Major announcements have been few and far between. There have certainly been no declarations of war. Instead they have grown under the radar, adding a new office here and a lateral partner there.

PwC’s decision to launch a US office focused on legal services is not a quiet move. The Firm has US offices. In fact, they already have two offices in Washington D.C. They could have easily built legal marketing and business development resources in their existing offices. Instead they established a US law firm. The company knew such an announcement would draw the attention of the legal press – this is almost certainly why they announced it in the manner in which they did. They also knew it would draw attention – from law firms and regulators. They clearly believed the benefits outweighed the costs.

Such boldness is new from PwC and from the Big Four. If PwC’s new office signals anything, it is that the period of cautious expansion has come to its natural end. Law firms should expect more “major announcements” from the Big Four in the future. ALM Intelligence’s upcoming report on the future of the Big Four details what these announcements might look like and the longer-term implications of these developments on the legal market. This week’s events suggest they will come sooner, and more frequently, than many anticipated.

 


Nicholas-Bruch - EditedNicholas 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.

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