The accountants are making some lawyers jittery. Some, but not all. There are still plenty of lawyers – mostly transactional – who think the accountants’ return to the legal sector is irrelevant to their business.
More fool them; they said the same about the Legal Services Act. The new entrants only threaten the volume end, they said. It won’t make any difference to established firms with a long-held client base, they said. But alternative business structures (ABS) are not an end in themselves; they are vehicles that allow traditional thinking in legal services to be challenged.
So the accountants’ relaunch into the legal sector via ABSs should worry law firms; just look at the multibillion-pound global platforms, distribution channels, commerciality and culture of cross-selling advisory services.
Yet, and yet. I’m sceptical whether the accountants can grow their own. The most successful is PwC, which kept the faith in the post-Andersen panic and maintains a £40m-odd business in the mid-market that encompasses business reorganisation, tax and regulatory investigations, immigration and IP/IT. Sure, PwC is taking bread from the mouths of the national firms here, but £40m doesn’t match the growth trajectory of, say, a Parabis in the insurance sector. In turn, that doesn’t suggest a wave of client demand; I spend a lot of time talking to general counsel and they’re not pining for an accountancy-led offering. If most buyers of legal services are lawyers, accountants are always going to have a bit of a brand issue.
So – head above the parapet here – the accountants are not going to be much of a threat in the medium term if they’re building from scratch. But where things get scary for law firms is if they go on a takeover binge and incorporate existing law firms within their ABS vehicles.
In the pre-Enron days the accountants never quite got the hang of law firm partnership culture. Firms that were tempted into the accountancy fold, such as Dundas & Wilson, were never pressured to transform. But that was before the recession and ABSs forced a new understanding of commerciality and service delivery. So what mid-sized firms need to worry about is the Big Four’s acquisition strategy and what they can build – but also how they can transform existing legal services into a modern advisory model.