KPMG rules out growing law firm in favour of new alliance

Big six accountancy firm KPMG has all but ruled out growing its own law firm in favour of forging an alliance with an existing firm, according to senior partner Colin Sharman.

Sharman, who last week took over as international chair of KPMG, told The Lawyer: “We have almost abandoned the strategy of building our own firm – it won't get us there quickly enough.”

As The Lawyer revealed last month, KPMG has made approaches to several national law firms about an alliance and, at the beginning of this year, made two senior appointments to the board. Roger Dickens became deputy senior partner and Mike Rake was made chief operating officer. The two were charged with developing a strategy for moving into the legal services market.

Sharman said: “We don't believe in one-stop shopping. We want to offer multi-disciplinary services.

“We don't believe we should provide one agency in which you can get all your legal services, corporate finance, audit services and so on.”

Asked why, he said: “We tried it and it didn't work. The market told us they wanted to shop around.”

Three years ago, KPMG's consulting division was reorganised. Accountants were made to work alongside management consultants in specific industry groups, but the change caused friction and income from the division dropped by 2 per cent over the last year, according to KPMG's financial results, published last week.

Sharman explained: “What we think is that when we offer a service it may be necessary from time to time to have, as a part of that service, a legal capacity.”

He explained that a client seeking to introduce a profit-related pay scheme, for example, would require the scheme to be designed by tax experts, human resource experts and employment lawyers.

KPMG's strategy is the opposite of rival Big Six firm Ernst & Young, which said last December that it is drawing up a shortlist of City lawyers to head its own law firm.

KPMG was this year appointed as auditor to Clifford Chance. Asked if this would affect the firm's legal strategy, Sharman said: “No, because a firm like Clifford Chance is not in the same market as us.”

KPMG became the first of the Big Six accountants to publish externally audited accounts last week.

Although income from its management consulting arm is down to £107m, audit and accounting business was up 5 per cent at £258m.