With many traditional law firms slow to address the growing client demand both in Australia and abroad for transitioning from ‘billable hours’ to results based billing, progressive accounting firms are seizing the opportunity to meet this increasing demand by creating combined legal and accounting service firms which play to their strengths.
The Big 4 accounting juggernaut networks KPMG, PwC, EY & Deloitte have been practising in the legal arena for many years, having added legal service divisions which have grown steadily, with many now larger than most law firms.
These Big 4 boast a combined total revenue of $120 billion. This enormous sum is even more astounding when you consider it surpasses completely the $89 billion in revenue generated by the 100 biggest legal firms combined!
In most countries, full-integration of law and accounting firms is not permitted, but there are countries which are setting their own rules and allowing accountants to compete head-on with lawyers for their clientele, taking a considerable chunk out of what the legal field had always considered was naturally their market share and theirs alone.
1. So far, most joint accounting and legal firms have kept away from lawsuits and big deal work, preferring to keep their attention on mid-tier, process orientated projects instead. Big deals and lawsuits are the bread and butter of elite legal firms, so this arrangement suits both legal eagles and accountants for the time being.
2. Regulation has also stymied how large combined accounting & legal firms can grow, with Australia, Mexico and Britain, the only countries so far to be exempt from the regulation. Fully integrated law and accounting firms are not permitted to operate within most European countries, nor America.
3. As Australia, Britain & Mexico do not have the same restrictions in place, it makes sense that into the future these combined firms will look to shore up their dominance and grow in these favourable nations as they offer the most opportunity, especially if the big traditional law firm players continue to resist change en masse.
Michael Roth from Kerma Partners, a consultancy firm which advises professional service companies, believes the Big 4 are ““the biggest underestimated threat to the legal profession today”.
The Big 4 Heavy-hitters are playing it smart. They are steering clear of full-integration of legal & accounting service firms, instead directing their energies towards legal areas which complement their accounting services including:
Immigration, as it pairs nicely with expatriate tax work.
Labour because it goes together well with human resources consulting, commercial contracts, due diligence & compliance.
Highly-profitable work on mergers & acquisitions and capital-markets transactions