Introduction

In this article, “The Reemergence of the Big Four in Law,” Professor David Wilkins, the faculty director of the Harvard Law School (HLS) Center on the Legal Profession and program chair of HLS Executive Education’s Leadership in Corporate Counsel program, explores the impact preeminent accounting firms are having in spheres traditionally dominated by law firms. From M&A to compliance, the Big Four have been acquiring influence in areas that many firms are now seeking to reestablish dominance and assert growth. This article first appeared in a 2016 issue, “The Reemergence of the Big Four in Law,” of the Center’s digital publication, The Practice.

The Center on the Legal Profession is a research organization dedicated to providing a richer understanding of the rapidly changing global legal profession. Many of the concepts contained in the article—concepts based on the Center’s ongoing research into the increasingly sophisticated ways in which in general counsel and in-house legal departments source their legal work, including to an ever-expanding network of “alternative” service provides like the Big Four—are explored in many of HLS Executive Education’s programs. For senior in-house leaders, the Leadership in Corporate Counsel program offers insights into the challenges of their increasingly complex roles. Providing a multi-faceted look at the M&A process, Mergers & Acquisitions: Structuring and Leading Deals teaches in-house and firm partners to leverage M&A to drive their organizations strategy.

The Reemergence of the Big Four in Law

Throughout the 1990s, the Big Five accounting firms—Arthur Andersen, KPMG, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and Deloitte—made a concerted effort to enter the legal services market. This effort was particularly pronounced—and particularly successful—in Europe. By the close of the twentieth century, legal networks that were directly owned or closely affiliated with the Big Five were major players in many markets around the world, and were threatening to enter markets in which they were still barred, such as in the United States. However, after the wave of accounting scandals that arose out of the 2001 financial crises—which brought down Arthur Andersen and ushered in regulatory reforms in the United States and other major economies that appeared to place severe restrictions on the ability of the now Big Four to offer nonauditing services to their audit clients—most observers concluded that the accounting firms’ legal networks were effectively dead. As a result, both practitioners and academics stopped paying attention to what these firms were doing in law.

Our research, however, points to a quite different conclusion. Using a unique data set comprised of information collected from the corporate websites of the Big Four and their affiliated or strategic partner law firms, as well as archival material accessible from the legal and accountancy press, we demonstrate, as Mark Twain might say, that the reports of the death of the Big Four’s legal ambitions have been greatly exaggerated. Far from dying, in recent years the legal service lines linked to the international accountancy networks have grown significantly in size, scope, and importance. Nor are the legal services these networks deliver confined to tax issues. Although tax-related advisory services remain an important cornerstone, the Big Four legal networks are now important players in a broad range of legal fields, including premium and fast-growing practices such as compliance, finance, M&A, and employment law.

Moreover, as impressive as the expansion of their legal networks has been over the last decade, there are good reasons to believe that the Big Four will be even more successful in penetrating the corporate legal services market in the decades to come. It is by now common knowledge that corporate clients are increasingly seeking globalized solutions that integrate law into a wider category of “business solutions”—precisely the approach these globally integrated multidisciplinary firms now champion. In the last decade of the twentieth century, the accounting firms attempted to enter the legal services market by aping the ways of large law firms, who at the time were universally acknowledged to be the market leaders. In the second decade of the twenty-first century, large law firms are now attempting to demonstrate that they can provide the same kind of seamless integration of law into effective global business solutions currently being championed by the Big Four (see “Navigating a Brave New World”). Indeed, by increasingly making themselves look like the Big Four in how they define and deliver legal services, large law firms may actually be hastening a world in which these global giants will no longer have to disguise their ambitions from regulators and the public.

It is still unclear whether any of the Big Four will be able to fulfill their ambitions of building, as Alexandru Reff, partner-in-charge of Deloitte’s Romanian tax and legal practice, confidently declared in 2013: “the largest legal network in the world.” It is, after all, far easier to promise seamless global multidisciplinary services than it is to deliver them. As we detail below, our research tracks primarily what the Big Four and others are saying about the legal services that are being delivered by their legal networks, as opposed to what they are actually doing in various markets. Moreover, much of law, and the regulation of how law is practiced, remains both local and in the hands of lawyers, which many argue safeguards important values that protect clients and the public but which also certainly protects the legal profession from competition from outsiders such as the Big Four legal networks. Nevertheless, Deloitte, PwC, KPMG, and EY can all credibly claim to be able to provide, according to Reff, “global presence” and the “ability to understand businesses and operate pragmatically, in close connection with experts from other areas, at costs optimized through efficient processes and technologies.” That is likely to make the Big Four formidable competitors in the new climate of more for less (see “A Global Age of More for Less”), which even the most skeptical observers now concede is reshaping the global market for corporate legal services.

In the remainder of this essay we summarize our research about what the Big Four have been doing since many proclaimed the death of their legal networks, and we discuss why, notwithstanding regulation expressly designed to destroy them, these networks have not only survived but thrived—and seem likely to expand even further in the future. We begin, however, with a brief history of the rise and fall of the big accounting firms’ original legal networks.

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