The battle for supremacy
26 May 1998
Competition between lawyers and accountants is hotting up as the Law Society of Ireland debates MDPs, says Mary Heaney
Next month the Law Society of Ireland Council is set to consider the controversial subject of multidisciplinary partnerships (MDPs). Whatever conclusion it arrives at, the betting is that MDPs, for better or for worse, are on the cards.
And if the accountants make serious moves into the legal marketplace, some law firms are also looking to take a slice of the tax market which is mainly the preserve of the accountants.
A law society working party, headed by Arthur Cox's John Fish, has been looking at the matter for several months. Its report, which Fish describes as a "cool examination of the issue", adopts "a pragmatic approach". But he is unwilling to elaborate before the matter goes to council.
But the accountancy firms are rather more cynical about the prospect of a dose of liberalisation hitting the law society.
Price Waterhouse managing partner Paul Cummings says that the market is "not entirely open and competitive in the way the rules are structured. We would like to make sure it's not anti-competitive".
His fear is that the law society will come forward with proposals on restricted certificates for those practising in the taxation arena.
"We get the impression that they are trying to win back the tax market for the legal profession by offering a limited certificate for quasi-solicitors," he says.
Law firms could then bring tax practitioners into their own practices. He says such a move would be viewed as anti-competitive. Accountants were concerned that what emerges "may not be true MDPs". He says that if this was the case, it may be put before the Competition Authority.
However, a law society spokesperson says there were no plans to introduce any type of limited certificate.
It is the second time the society will vote on the issue. In 1991, MDPs were considered but rejected.
However, opinion is moving towards supporting the concept; there is a feeling of inevitability because the Big Six already have major networks throughout Europe.
A survey carried out by The Lawyer this week of the top 30 law firms in the Republic revealed that more than half supported MDPs and one in three believed that link-ups between accountancy firms and law firms were inevitable in the near future.
Three firms out of the 30 admitted to having talks with accountants on that very subject while a number of others chose not to answer this question.
Some of the Big Six have already made inroads to legal practice in Dublin - KPMG and Price Waterhouse particularly. KPMG, for example, set up the Corporate Legal Advisory Services (CLAS) department last year which replaced the Company Secretarial Services Department.
It recruited solicitor Chaoime Collins and barrister Michael O'Toole to head the department which gives advice on company law, EU directives, regulatory tax work, International Financial Services Centre work as well as some banking and stock exchange work.
The company planned to grow the department to 20 staff, but, according to managing partner Jerome Kennedy, it now stands at about 40.
He says the firm is "pleased with progress to date" but is reluctant to discuss the future for the department over the next five years.
However, Kennedy says that it may develop through organic growth or a link with a major firm. "We would like to be in the position where we could give a broader range of services to clients."
The plans of Coopers & Lybrand and Price Waterhouse may take an interesting turn when their merger goes through.
Price Waterhouse has already thrown down the gauntlet worldwide and 18 months ago began to recruit tax lawyers from a variety of law firms.
It has four solicitors in its Dublin office as part of the tax practice, and managing partner Paul Cummings says the firm's "global ambition is to get into legal services". The Dublin tax group does "legal work associated with the tax part of corporate work", but is "such a minnow".
He says that they had not made the final decision on how big the department would get and the areas that it would practice in but were "ambitious to be a serious player in the legal marketplace".
He predicted that the legal services market would see major changes in the next five years. Internationally, Price Waterhouse now has 900 or so lawyers, half of whom practice corporate/commercial law.
Cummings says there is now a demand from clients for global solutions to their problems. "We're now noticing some of the bigger international clients are looking for multi-country solutions to their problems. Law firms don't have these networks."
For the moment, the Dublin arm of Coopers & Lybrand says it has reviewed the issue but has decided not to pursue it although it has three to four lawyers working in the firm.
Managing partner Bill Cunningham says "our international firm has been keen to break into it", and a number of competitors had decided to move into it. But Coopers Dublin for the moment has "decided that it's not one of the priority areas".
One of the reasons was that Dublin "was a small market with a lot of competition. We get a lot of work from law firms and law firms get a lot of work from us. There would want to be significant pluses before taking on the minuses," he says.
However, he conceded that the merger with Price Waterhouse may change everything and if so, a link-up with a law firm would be preferable to a greenfield approach.
Others were more evasive about their plans in the market. Despite Arthur Andersen's high profile European law firm network Roddy Ryan, managing partner of Arthur Andersen, says the Dublin office has "no immediate plans to get into the legal marketplace" although it "was of interest".
Outside the Big Six, Anthuan Xavier of BDO Simpson Xavier says that while his firm's strategy was not to form MDPs but to "live on the conflicts", he predicted that law firms would not take the accountants' move lying down.
"A lot of lawyers have moved into tax area in direct competition with the accountants."
One such firm is Matheson Ormsby Prentice. Managing partner Donal Roche says his firm was actively recruiting tax lawyers and intended to strengthen its practice in this area. He has just poached two high level tax managers from KPMG bringing the total in the tax department to 10. Plans are in place to increase this to 15 in the next year.
Another firm which is building up a tax practice is A&L Goodbody. According to managing partner Frank O'Riordan: "We have no problem with extra competition. Most law firms are looking at their tax capacity." But he predicted that over the next few years the landscape will change as "clients are happy to take legal services from a number of quarters".
The knives have been sharpened and the battle has begun.
Irish law firms have, on the whole, followed the economy in terms of growth. Most added on significant numbers of fee earners and saw work increase by between 10 and 20 per cent. Some firms in the second tier did not fare as well. If these firms follow the UK pattern, they may increasingly find themselves squeezed by the bigger firms and, at a later date, the Big Six.
As yet, only two UK firms, Masons and Park Nelson, have entered the Dublin scene. But Clifford Chance's strong showing in the recent Finance magazine tables for mergers and acquisitions may worry a few.
Estimates of turnover vary wildly with observers reckoning A&L Goodbody to be in the region of £24m; McCann Fitzgerald to be £22m; Arthur Cox £16-18m; William Fry £10-12m; and Mason Hayes & Curran to be between £6m and £8m. Salaries in Irish firms, traditionally lagging behind London, are also on the increase for the right candidates, a prized possession in an increasingly competitive marketplace.
A&L Goodbody is still top of the table, adding on 10 fee earners and six partners from last year. McCann Fitzgerald made up 10 partners in the past year. McCanns has also got the largest numbers of female partners, 14 out of its 50 partners; A&L Goodbody has nine female partners out of 45.
Arthur Cox has grown by 25 per cent in the past year with 27 new fee-earners; this is partially due to the firm's merger with NI firm Martin & Brownlie.
Matheson Ormsby Prentice has increased its fee earners by 21 in the past year, a 20 per cent increase. Matheson Ormsby is on the alert for good opportunities and has had talks with players from some of the top firms in the past year.
William Fry has leaped from sixth place last year to fifth this year with 16 new fee earners including 14 new assistants and two new partners. In the past year it poached partner Ken Casey from Gerard Scallan O' Brien.
Gerard Scallan is one of the few firms to decrease in size since last year, dropping by six fee earners and one assistant. This places it at an unfortunate number 13 in this year's table. Gerard Scallan is rumoured to have engaged in talks with one leading firm in the past year but negotiations did not work out.
Eugene F Collins remains in eighth position with just three more fee-earners. However, it has relocated to Matheson Ormsby's old offices in Burlington Road, renaming them "Temple Chambers". The firm has been eyed up by at least one accountancy practice as a potential good fit, but the jury is out on whether such a move will take place. Senior partner Anthony Collins is certainly not averse to the idea of multidisciplinary practice.
Mason Hayes & Curran moves from fifth to sixth place this year owing to William Fry's growth. MHC has been involved in some high profile deals this year. It has also recruited English property lawyer Andrew Beer from Ivor Fitzpatrick as a consultant and is taking serious steps to develop its IFSC work.
Dillon Eustace has moved up the table to 9th place and is continuing to develop its top notch IFSC practice as well as its litigation and property practice. It is is looking to recruit four new assistants.
O'Donnell Sweeney has moved down a place to 10, but has added four fee earners and recruited Dockrell Farrell mergers and acquisitions partner David O'Beirne.