The reality behind the hype: EY Law chief Grossman on the big four's threat to law firms
After a year of rapid expansion into the legal market, EY's global law leader says his firm is targeting mid-market work
April 29, 2015 at 07:03 PM
4 minute read
Given the push that the big four accountants have been making into the legal market over the last year, it is easy to see why management at traditional law firms may be feeling nervous. EY Law's expansion everywhere from Sweden to South Korea –including partner hires from the likes of Freshfields Bruckhaus Deringer and Addleshaw Goddard – has been hard to miss. Meanwhile, PwC last year committed to further building its 250-lawyer service.
Some firms have already reacted. Eversheds' addition of a financial services regulatory compliance team to its consulting arm was inspired in part by frustrations that governance, risk and compliance mandates were too often being poached by the big four accountants (EY, PwC, KPMG and Deloitte).
However, the industry has witnessed the rise –and fall – of the accountants before. So are law firms right to be worried about the threat to their business this time?
"What's different this time round is that we didn't start things off to become an international law firm," says EY Law global leader Cornelius Grossman. "Now we are much more focused on integration and jointly going to market with our colleagues at EY."
The strategy seems to be paying dividends if the firm's growth is anything to go by – its headcount has doubled since 2009. Crucially though, Grossman says he is staunchly refusing to target the highest level – "bet the company" – work and premier corporate deals.
Instead, he believes EY Law will succeed with multi-disciplinary teams doing mid-market transactional work. "We want to be known for compliance jobs that span over tens of jurisdictions and for large international reorganisations," he explains. "In any transaction you need advisory and tax people as well as lawyers. If they come from different firms you have frictions. If they come from the same firm they generate synergies."
While Grossman may not be out to poach the elite law firms' clients, he is certainly angling to steal some of their brightest lawyers.
Freshfields' former global people partner, Richard Norbruis, has headed EY's global transaction law practice since September, a hire that came on the back of Berwin Leighton Paisner finance chief Matthew Kellett and Addleshaw Goddard corporate head Philip Goodstone joining.
And there are more lateral hires to come in the UK, according to Grossman, most probably in the banking and finance sector.
There is also a definite plan for further international expansion, despite the fact that EY Law has tripled the number of jurisdictions it operates in over the last two years. Grossman is aiming to increase EY Law's presence to cover 80 jurisdictions by the end of 2017, up from the 66 countries it is currently in. Then, he says, the firm will be everywhere it wants to be.
Despite this rapid growth plan, Grossman maintains that established commercial law firms don't have much to fear. "We have to realise [the top end is] a highly competitive market with great law firms that have established their brands over hundreds of years… We are not going to catch them," he admits.
"The threat of accounting firms to the legal market is overstated. There's so much work out there that we all compete for – I don't think any firm in particular should feel threatened by that."
But is Grossman worried that law firms could replicate the EY model by using alternative business structures and setting up consulting arms in direct competition to the big four – albeit on a far smaller scale – for example Eversheds?
"Honestly, no. We are in a similar position [here] to where the magic circle is to us [for law], and I don't think they lose any sleep over it."
It is an oddly relaxed approach for someone who is meant to be taking the legal market by storm. No doubt there will be casualties if the big four's march continues, but for now at least Grossman thinks everyone can get along just fine.
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