Big Four firm KPMG is applying for a special ABS licence in Arizona to provide legal services in America. But, if it gets permission will
Big Four firm KPMG is applying for a special ABS licence in Arizona to provide legal services in America. But, if it gets permission will it make a difference to the market?
For at least 25 years lawyers have been worried about the impact the Big Four might have on the legal world. However, as the UK and other liberal markets have shown, they’ve actually had little impact where they’ve been allowed to provide regulated legal services, apart from inspiring local firms to up their innovation game.
Will things be any different in the US? Probably not.
Note: KPMG doesn’t yet have permission to operate under Arizona’s exceptional ABS rules (which are similar to those in Utah – another state that allows external ownership of legal practices). It is understood that there will be a meeting on January 14 to decide whether to allow this to happen, according to Reuters – see here.
Making A Difference?
Why won’t the Big Four operating in the US rock the legal world there? Well, let’s look at what has happened in the UK, a market where they have certainly tried to build legal teams at scale.
- Attracting top talent – to really take the fight to the leading BigLaw firms the Big Four need top talent. Not just talent in terms of legal skills, but with portable clients as well. KPMG and others do have great client networks already – for sure – but those clients use a range of traditional law firms for key legal advice already. When the likes of PwC, EY, and others built legal teams in the UK the challenge was that if you were a top lawyer with a solid book of business, then why move to the Big Four with all its bureaucracy, where you may not necessarily make more money than in a law firm, and where your locally-based legal team will be much smaller than at your firm? E.g. moving from a 1,000 lawyer firm based in London with a dozen leading practice groups to a team also in London at a Big Four firm where there are just 100 or so lawyers locally and with limited market recognition. If you can’t bring in the very top people, then you won’t win the top work. Also, will clients go to a Big Four firm’s relatively small corporate legal team to handle the core advice around a billion dollar M&A deal? Probably not. In short, the legal dreams of the Big Four in the UK have not amounted to anything like what people feared, at least not for top-end work.
- ALSP / Process Work – the Big Four have also tried the ALSP, process work strategy as well, e.g. EY buying Pangea to handle bulk work. But, as of 2024, those projects seem to have lost most of their steam, although KPMG does still seem to be serious about this area, e.g. see their alliance with ContractPodAI to handle inhouse contract work. The reality is that UK law firms responded well and built their own ALSPs, but they perhaps didn’t need to, as the market was not that excited about the Big Four offering such facilities in any case when it came to saving money on scaled matters. Clients probably should have cared – a lot – but they didn’t. Maybe that can change, but one should never assume that even very large corporates will turn to ALSPs for transactional / contract work at scale. If they did then ALSPs would today be many, many times larger than they are. Instead, most make their money from handling eDiscovery matters, and even there they are limited. The truth is that inhouse teams have generally continued to rely on traditional law firms – even if more expensive – for process work, despite having alternatives on tap, or done it internally. This could change….and one hopes it will. In fact, it’s often incredible how willing clients are to over-spend where they have no need to. But, that’s where we are. (One other hope is that some of the most developed ALSPs out there really embrace genAI and really make the case for inhouse teams to use them at scale – rather than being slightly more economical versions of what already exists within law firms. Maybe that can change things…?)
- Middle Range Legal Work – the one area where the BigFour can make an impact and grow at scale, and do so globally, is on ‘middle range’ work that is often related to larger complex corporate needs, e.g. handling employment matters for a big company after a merger, or the launch of a new office in a market such as China. This is not ‘rocket science’ work – it’s complex, it’s large-scale, and a global footprint is very helpful – but it won’t give the top law firms anything to worry about, not unless they’re depending on a lot of this type of middle range work to bulk out their profits. It may of course make some larger mid-tier law firms worry. But, that said, that has not killed off such firms in the UK either.
- Business Model – just because a group of lawyers are within ‘X’ structure, whether a partnership, a large corporate, or something else, doesn’t in itself change how they work. If KPMG massively changed the game with tons of legal AI tech and new workflows, and new ways of engaging with clients, and much lower prices, that might make a big difference. But, if a Big Four firm, or anyone else, has a bunch of lawyers offering traditional legal services, using traditional methods, billing by the hour, relying on pyramidal leverage, and using all the rest of the old legal model, then nothing much can change. Ownership of a legal team is not in itself a radical change, it’s how the legal team works that matters. And this is a key reason why ABSs in the UK have made very little impact.
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