You’ve Been Thinking About The Big Four All Wrong

Teresa Owusu-Adjei has been PwC’s U.K. head of legal for nearly a year, but there is something she has only recently told her team. Despite heading up a 400-strong legal business, she is not actually a solicitor.

“I only revealed this to the team a few days ago – I’m not a lawyer,” she says. “It’s a business mindset that I bring to the role.”

Such moves remain rare in traditional law firms. But Owusu-Adjei’s appointment is emblematic of how the Big Four want to do things differently when it comes to law. Instead of simply offering legal advice, they are betting that consulting services, technology and linking up professionals from across their businesses will mean they can finally start making big money from legal departments.

“We see that the best way of ensuring that the [legal] business is successful is having someone like me who can connect up with all the different parts of the business,” she says.

If successful, this quiet shift in strategy could have big implications not just for the Big Four but for all law firms. Potentially changing the way that general counsel manage their teams and what they expect from their external lawyers.

Mini law firms

From the outside, it can be hard to tell exactly what the Big Four do when it comes to law. Despite being on the scene for nearly three decades, their teams are still relatively small, their revenues modest and they don’t usually have big-name partners in their ranks. It means that many law firms dismiss the threat the Big Four pose.

You’ve Been Thinking About The Big Four All Wrong Bob Couture, Harvard

Robert Couture, a senior research fellow at Harvard Law School’s Center on the Legal Profession, interviewed 20 senior leaders at the Global 100 firms about what they knew about and how they were responding to the Big Four. Most did not have a clue.

“Our awareness is one-inch deep”, was the response of one executive. “We only have one partner that believes there are barbarians at the gate,” said another.

Couture found that a “significant number of firms have given little or no thought” to the competitive threat the Big Four pose, with a quarter having “virtually no knowledge” of what the Big Four were doing. While half only had “casual awareness” of their activities.

Much of that is down to the legacy of how the accounting giants first arrived on the Anglo-Saxon legal scene.

When the Big Five (Arthur Andersen was the fifth) started their legal arms in the 1990s, they expressly wanted to take on traditional law firms at their own game. PwC wanted to be one of the top six law firms in every country that it operated. Ernst & Young said it wanted to have a global law firm with 4,000 staff by 2003.

At that stage, English law still required legal and other professions to be legally separate. So to achieve their ambitions, they forged alliances with law firms, hired star lawyers and tried to make their legal arms look and feel like any other law firm.

But with the collapse of Enron, WorldCom and then Arthur Andersen in the early 2000s, those ambitions floundered as the firms focused on shoring up their core accountancy business. Many declared that accountancy firms’ drive in the legal arena was dead.

Changing strategy

Many in the market assume that the Big Four’s legal ambitions continue in that vein – effectively that they want to run mini-law firms to compete directly with traditional law firms.

But in the past five years, the Big Four have been rethinking their strategy. While they still offer traditional legal services, such as regulatory or employment advice, other business lines are coming to the fore.

Couture says that law is now an “add-on” of the Big Four’s “arsenal” of services these days. He points out that they often get their foot in the door through their consulting teams, advising corporate legal departments on how to make their day-to-day legal operations more efficient.

“They are saying ‘look you don’t have to a bunch of lawyers come in to tell you how to run your legal department better. That’s not a legal question, it’s a business question’. That is where a lot of Chief Legal Officers and general counsel are getting their familiarity with the Big Four. They are not hiring them for legal work, they are hiring them for internal operations.”

New business lines

Michael Castle, Deloitte Legal U.K. managing partner

Deloitte Legal U.K. managing partner Michael Castle, one of the most high profile lawyers at a Big Four firm after joining from Allen & Overy three years ago, agrees that traditional legal work is only one part of what the firm now offers.

Armed with an iPad showing four interlocking circles representing Deloitte’s legal business lines, he explains how providing outsourced lawyers, consulting and technology to legal departments are just as important as traditional legal work to Deloitte’s strategy these days.

“There is possibly a misconception that Deloitte Legal is simply a small law firm within a much larger organisation, but that is not the case, The reality is that Deloitte Legal is like any other part of Deloitte’s business,” he says.

Castle says that general counsel increasingly want help reorganising the way their teams work, with technology to automate run-of-the-mill work and data to analyse how to make processes ever more efficient.

“Legal knowledge on its own is not enough to provide the services that our clients want,” he says, adding that Deloitte has more than doubled its lawyer headcount and tripled the number of partners in the U.K. in the past two years, helped by the acquisition of tech-focused law firm Kemp Little in 2020.

Much of this change in strategy is driven the the pressure that general counsel are under to cut costs. For many years, legal departments were largely immune from efficiency drives, often put into the ‘too difficult’ to tackle bucket by consultants and c-suite executives. But as legal spend spiralled in the wake of the financial crisis, that has changed.

“Where CEOs are going now is that in this new competitive world, everything is on the table,” says PwC’s Owusu-Adjei. “For the first time GC’s are being asked to deliver the same kind of efficiencies that the CFO or the head of tax or head of compliance is being asked to do.”

A big part of her job is trying to get PwC’s 400 strong legal team to work alongside other professionals as part of a unified team. So if the firm was talking to a general counsel about climate change, they would ensure that an environmental lawyer, a tax specialist and climate specialist were all present.

Teresa Owusu-Adjei (Image: PwC)

Owusu-Adjei does not want to compete head-on with law firms, instead she wants to grow new legal markets.

PwC has signed off plans to double the size of its U.K legal arm in the next three to four years.

“I don’t see it as an either-or” in picking between the Big Four or traditional law firms, says Owusu-Adjei. “It’s an expansion of the art of the possible.”

EY has also made big investments in legal consulting. In 2018 it purchased alternative legal service provider Riverview Law, which was partially owned by DLA Piper. While in 2019, the accountancy giant purchased legal managed services provider Pangea3 from Thomson Reuters.

Philip Goodstone, EY’s head of law for the U.K. and Ireland, says that this consulting work enables the firm to have “different sorts of conversations” with clients and an “additional level of differentiation” from traditional law firms. He also emphasises that EY can draw on its non-legal professionals from across the world and deep sector expertise to woo clients.

Goodstone is planning major expansion for EY’s U.K. legal practice, planning to grow from 200 lawyers to potentially up to 1,000 in the next three years. It has made a start on that – in August, the firm hired a four-partner energy and sustainability team from Eversheds Sutherland for its legal arm.

Goodstone believes that it is not just providing consulting services that will fuel EY’s growth, but hiring top-drawer lawyers who are able to win work directly from general counsel that will be key to its success.

“We would like to be between three and five times bigger over the next three years,” he said. “We want market-leading partners who are recognised experts who have a track record of winning work.”


The big question is, does this change in strategy matter to law firms?

Matthew Peacock, managing partner at legal-focused consultancy OMC Partners, agrees that the Big Four are not competing head-on with law firms, particularly for “bet the farm” legal issues, such as complex regulatory advice, a major merger or litigation. But he still thinks that they could pose problems for many mid-tier firms.

“I absolutely agree that they are not competing on a like for like footing with firms. But the thing that the Big Four have that traditional Big Law does not, is that huge depth of coverage across an enterprise, particularly at C-suite level. What they are really doing is delivering enterprise-wide solutions and legal is part of that.”

The sheer size of the Big Four compared to the world’s biggest law firms means they can field a deeper bench of people. The world’s largest law firm by revenue, Kirkland & Ellis, had a turnover of $4.8 billion in 2021. By contrast, KPMG, the smallest of the Big Four pulled in $32.1 billion of revenue last year.

The question general counsel may come to ask is why bother coordinating lawyers, consultants and advisers from a range of different organisations in different countries if you can get all that advice under one roof?

Sceptics would say that general counsel can get a better level of service by shopping around for the best lawyer for each matter. One job may benefit from a pensions specialist from a boutique who has deep sector knowledge, another to a pensions specialist from the Magic Circle with a wider corporate practice. Each issue is different.

But Peacock has seen first hand how this global scale could work in the Big Four’s favour—and ultimately take market share from some firms.

“I recently spoke to a couple of senior GC’s who told me that when it came to Brexit and Libor and other large scale projects, law firms just don’t have the footprint or depth or multinational project teams to deliver these things quickly at scale,” he says. “I think the Big Four have been very good at linking up their wider teams in finance, risk, HR, compliance and now in legal bringing together all of these things.”

Nick Roome, KPMG

Nick Roome, head of KPMG Law in the U.K., agrees this is the opportunity he sees, saying: “If clients just want a stand-alone piece of legal work, they can certainly come to us for it, but the chances are that they already have established relationships for it. So where is the reason for them to work with us?,” says Roome. “The integrated approach is key. I would say well over 90% of what we do has an integrated flavour to it. It’s core to our model.”

He adds his firm’s ambition is “to be one of the most technology-enabled legal services practice on the planet”. He says this is a “big differentiator” because of KPMG’s capabilities.

The growth of the accounting giants in law could also affect law firms in a more subtle way. It may mean that clients come to expect as standard many of the things that consultants routinely provide. Things such as better technology, more data, fixed fees and less reliance on expensive trainees to do straight-forward work.

Harvard’s Couture believes that part of their impact could be that they make clients realise that a lot of the work that they get law firms to do does not need the “price point of a licensed attorney to do that work”.

“The question is not how much legal work are the Big Four doing, but how much work are they doing that lawyers did before?”, he says.

A big if

But for many in the legal market, all of this is a big if. Success is not a given for the accounting giants and many in private practice greet this change in strategy with a shrug.

Michael Chissick, Fieldfisher

“I just don’t think they are going to fundamentally shake things up. They are always crying wolf but never quite getting there,” says Michael Chissick, managing partner of U.K.-based law firm Fieldfisher.

He points out that despite their multi-billion pound turnover and global reach, their U.K. legal revenues are still likely smaller than mid-market Fieldfisher’s, which had a turnover of £290m last year.

Chissick believes that law will continue to be a difficult market for the Big Four to crack because it is so relationship-driven and sophisticated general counsel generally do not mind using different law firms for different type of work.

“It isn’t like buying accountancy services. Legal services is very, very different. It is very much relationship-based,” he says. “It’s not a given that clients will want to go to the same place for their technology, accountancy, audit and legal. The GCs who often control the budgets are very, very sophisticated buyers.”

He adds the Big Four may be able to pick up some of the more commoditised legal work “but we are all competing for that type of work these days”.

But some law firms are starting to respond to the Big Four with some expanding what they offer to clients, making them look a bit like mini professional services organisations. Hogan Lovells set up a financial regulation consulting service in 2018; Addleshaw Goddard and Pinsent Masons have managed legal services arms; while DLA Piper set up Law& brand in 2020 to provide legal consulting and artificial intelligence services.

Jean-Pierre Douglas-Henry, a partner at DLA Piper, says that this move is vital because clients are no longer satisfied with just receiving legal advice, but also want joined-up general business advice.

“Clients are rightly demanding more of their lawyers and I just don’t think law firms who simply provide legal advice will continue to be able to compete for and win work,” he says.

Douglas-Henry believes that in order to survive and move with the times, law firms will need to start offering a wider range of services to clients. In effect making them look more like the Big Four.

“I think in five or ten years time, in some areas even sooner, we will not have law firms in the way that we have them now”, he says. “There will be lawyers, technologists, business advisers – and the collective whole will provide a holistic service rather than simply legal advice.”

The Big Four are relishing that challenge. KPMG’s Roome adds: “I think we do offer something different. I think we are a really healthy part of the ecosystem. I think some level of challenge and competition into the [legal] sector is really healthy.”