Last month PwC Legal got an ABS licence, which will allow it to own its legal arm at last. PwC, readers will hardly need reminding, is an organisation rich in resources with a distribution network second to none.
There are huge opportunities for the accountants to use their networks in emerging markets, which will pose challenges for global law firms. The Big Four have offices all over Africa, for example. Just read the runes in China. Two weeks ago EY acquired Shanghai law firm Chen & Co and in December hired a former HSF Singapore partner to prep the local market. In 2013 Deloitte also set up a Shanghai legal business.
When you talk to lawyers about what the accountants might want out of the legal market you usually get an inappropriately dismissive response along the lines of bean-counters not being in the game for top-end M&A. But top-end M&A makes up a small percentage of work outside the magic circle. The accountants are after bread and butter commercial, employment, mid-level corporate, immigration, outsourcing and IP; it may not be bet-the-company stuff, but they create deep relationships with clients that can be leveraged.
The accountants’ incursion into law a decade ago tends now to be thought of as a failed experiment. The unforeseen consequences of the collapse of Enron brought in Sarbanes-Oxley, regulated the practice of audit and advisory work, killed off Andersen Legal and stalled the accountants’ progress into legal services. But before its disintegration Garretts (Andersen Legal in the UK) was turning over £37m and respected firms such as Dundas & Wilson, Garrigues and Rajah & Tann had already signed up to the international network. In 2003 KPMG’s associated law firm KLegal was turning over £41.5m, having bulked up its presence in the UK in 2002 by attracting McGrigor Donald (now part of Pinsent Masons) to the fold.
Nowadays, in a more liberalised market, the proposition of multidisciplinary practices is commonplace. Every week brings a new ABS entrant, some with bigger war chests than others. Most lawyers outside the magic circle are (marginally) less snobbish than they were a decade ago and a whole lot more anxious.
So here’s something else to consider. With all the consolidation in the legal market it is not beyond the bounds of possibility that an accountancy-backed ABS will start a takeover spree. PwC hasn’t built a $32bn business on a wing and