At times, the relationship between corporate law firms and the Big Four accounting firms has to be an uncomfortable one. While the closest of professional friends, law firms can never discount the possibility that, at any given moment, the accounting firms could become interested in eating their lunch.
In the UK and US, accountancies have been moving aggressively into the areas of legal support services. So no one was overly surprised when Deloitte LLP acquired ATD Legal Services last year or when PwC Canada announced it was buying Platinum Legal Group, an e-discovery and litigation support firm, this spring. The bigger question being asked sotto voce is whether accountancies are dipping their toes in the water in preparation for taking another stab at practising law.
Everyone in Canada remembers the failed experiment of Donahue Ernst & Young LLP, but memories are fading. The Canadian Bar Association said in a 2013 report that it expects the market to be affected by “increased competition … by the ‘Big Four’ accounting firms.”
Christopher Sweeney, president of LexLocum, which provides document review among its suite of outsourced services, says accountancies are looking for ways to grow as law firms scale back for efficiency. “The accountancies are all about growth and, as part of that, they’re looking at getting straight into legal. They’ve tried it before and it all collapsed with Arthur Anderson. But I think the only reason it collapsed is because it got caught up with Enron.”
Sweeney says the big accountancies have figured out that, while they can’t offer legal advice to the publicly listed clients they audit, they can offer non-audit clients legal services. While not everyone within the firms agrees with going into the practice of law, he says, they do see legal support work as ripe for the picking. “I think it’s going to be a massive growth sector. Right now they’re just taking the low-hanging fruit, the document review and e-discovery stuff. Law firms are turning themselves into pretzels trying to hang on to that work.”
A class-action lawsuit filed three days after the Platinum acquisition was announced shows just how daunting that may be. Buried in the claim against Deloitte LLP and Procom Consultants Group Ltd. is this startling allegation: lawyers doing document review for Deloitte are paid a relatively paltry $43 an hour. (Deloitte declined to discuss anything related to the suit, saying it is before the courts.)
Jordan Furlong, an Ottawa-based industry analyst and consultant, says he can’t see how law firms can compete, “not the way they’re set up right now. Law firms tend to price the work they do in a totally non-competitive way, in the sense that they don’t look at what other people are charging for it because the only other people charging for it have been other law firms — and they all charge basically the same thing. That’s one of the things the accounting firms are bringing into the mix.”
Furlong believes accounting firms are going to ramp up the amount of legal work they offer. He predicts that, while they may not go after the bet-the-company work, they will go after the run-the-company work. “Their assessment, I think, is that a lot of the work that gets done on the law side isn’t that far removed from pure business-process-transactional, check-the-boxes work. It’s compliance work. There’s tons of it and more all the time. I think the accounting firms have said: ‘We would love, love to have a piece of that.”
PwC has already moved into legal services in a strategic way, says Lori-Ann Beausoleil, National Forensic Services Leader and the Consulting & Deals Leader for the the auditor’s Canadian real estate practice. “We recently acquired [Bomza Law Group], which does immigration law, because as you can imagine, our firm is global. We have people moving, our clients have people moving — so we found that to be a very profitable acquisition. We also have Wilson & Partners [LLP], a law firm, as part of our real estate practice.”
Where it gets complicated is litigation. Aside from that, it’s game on. “Would PwC look to legal services? I think you’ll see it more in tax and other non-litigation areas of law. So I believe, yes, I see a trend. I don’t think we’re planning on competing with these global law firms, but there are certain strategic areas that would bode well for us.”
In the UK and US, accountancies have been moving aggressively into the areas of legal support services. So no one was overly surprised when Deloitte LLP acquired ATD Legal Services last year or when PwC Canada announced it was buying Platinum Legal Group, an e-discovery and litigation support firm, this spring. The bigger question being asked sotto voce is whether accountancies are dipping their toes in the water in preparation for taking another stab at practising law.
Everyone in Canada remembers the failed experiment of Donahue Ernst & Young LLP, but memories are fading. The Canadian Bar Association said in a 2013 report that it expects the market to be affected by “increased competition … by the ‘Big Four’ accounting firms.”
Christopher Sweeney, president of LexLocum, which provides document review among its suite of outsourced services, says accountancies are looking for ways to grow as law firms scale back for efficiency. “The accountancies are all about growth and, as part of that, they’re looking at getting straight into legal. They’ve tried it before and it all collapsed with Arthur Anderson. But I think the only reason it collapsed is because it got caught up with Enron.”
Sweeney says the big accountancies have figured out that, while they can’t offer legal advice to the publicly listed clients they audit, they can offer non-audit clients legal services. While not everyone within the firms agrees with going into the practice of law, he says, they do see legal support work as ripe for the picking. “I think it’s going to be a massive growth sector. Right now they’re just taking the low-hanging fruit, the document review and e-discovery stuff. Law firms are turning themselves into pretzels trying to hang on to that work.”
A class-action lawsuit filed three days after the Platinum acquisition was announced shows just how daunting that may be. Buried in the claim against Deloitte LLP and Procom Consultants Group Ltd. is this startling allegation: lawyers doing document review for Deloitte are paid a relatively paltry $43 an hour. (Deloitte declined to discuss anything related to the suit, saying it is before the courts.)
Jordan Furlong, an Ottawa-based industry analyst and consultant, says he can’t see how law firms can compete, “not the way they’re set up right now. Law firms tend to price the work they do in a totally non-competitive way, in the sense that they don’t look at what other people are charging for it because the only other people charging for it have been other law firms — and they all charge basically the same thing. That’s one of the things the accounting firms are bringing into the mix.”
Furlong believes accounting firms are going to ramp up the amount of legal work they offer. He predicts that, while they may not go after the bet-the-company work, they will go after the run-the-company work. “Their assessment, I think, is that a lot of the work that gets done on the law side isn’t that far removed from pure business-process-transactional, check-the-boxes work. It’s compliance work. There’s tons of it and more all the time. I think the accounting firms have said: ‘We would love, love to have a piece of that.”
PwC has already moved into legal services in a strategic way, says Lori-Ann Beausoleil, National Forensic Services Leader and the Consulting & Deals Leader for the the auditor’s Canadian real estate practice. “We recently acquired [Bomza Law Group], which does immigration law, because as you can imagine, our firm is global. We have people moving, our clients have people moving — so we found that to be a very profitable acquisition. We also have Wilson & Partners [LLP], a law firm, as part of our real estate practice.”
Where it gets complicated is litigation. Aside from that, it’s game on. “Would PwC look to legal services? I think you’ll see it more in tax and other non-litigation areas of law. So I believe, yes, I see a trend. I don’t think we’re planning on competing with these global law firms, but there are certain strategic areas that would bode well for us.”
