Below is the introduction of Elephants in the Room Part II: The Future of the Big Four in the Legal Market. The full report is available on the ALM Intelligence website. 

Over the past decade, the Big Four, as the largest accounting firms have come to be known, have expanded aggressively into the legal market. Today, their legal arms are as large, at least in lawyer terms, as many of the biggest law firms in the world. As documented in an accompanying paper by ALM Intelligence, Elephants in the Room Part I: The Big Four’s Expansion in the Legal Services Market, the Big Four have penetrated many lower and mid-value areas of the legal market. In some areas, the Big Four have even eclipsed law firms as the primary provider of legal services.

Despite these successes, the Big Four’s future in the legal market is far from guaranteed. A scandal, similar to the Enron crisis of the early 2000s, could cause regulators to, once again, limit the range of legal services accounting firms are able to provide. Clients could also stand as a barrier to the Big Four. Many corporate clients have been reluctant to see the larger accounting companies as peers to elite law firms. An unwillingness to shift this view could isolate accounting companies to providing lower value legal services. Law firms could also thwart the Big Four’s ambitions. Today’s law firms are large, global, and professionally managed. They are also keenly aware of the threat accounting companies pose.

The biggest question looming over the Big Four’s future in the legal market is their ultimate ambition. The strength of the Big Four’s offering and their well-known appetite for growth give them several viable options. ALM Intelligence’s research suggests that three future scenarios seem most likely:

  1. Deepen Focus on Legal Services with an Accounting or Consulting Overlap: the legal arms of the Big Four could remain in their current form – ancillary businesses designed to support the company’s core tax and advisory arms.
  2. Expand into a ‘Full Service’ Offering: the Big Four could expand into a wider range of legal services, and transform their legal arms into standalone businesses similar to their current tax and consulting offerings. Such a move would bring them into direct competition with leading law firms.
  3. Develop a Managed Legal Service Offering: the Big Four could develop a range of managed legal services that look similar to the current offering of alternative legal service providers.

This paper examines each of these scenarios – which are not mutually exclusive – in detail.  Each offers opportunities and risks to the Big Four, to law firms, and to other players in the legal market. Many of the strategies laid out in these scenarios could develop into large businesses with the potential to rival traditional law firms. A combination of strategies, however, poses the biggest risk to law firms and the largest opportunity to accounting firms.

Download the full report here

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.