Big Four: The slow death of KPMG, EY, PwC and Deloitte’s legal dream
The Big Four giants—EY PwC, Deloitte, and KPMG—have all launched legal arms to compete against the traditional legal sector, but recent cracks show that their vision is not playing out.
The Legal Services Act 2007 introduced Alternative Business Structure (ABS) licenses, which allowed the Big Four to compete in the UK legal market.
It wasn’t the firms’ first time in the market, having had legal practices since the 1990s, but the ABS saw the Big Four aggressively reshape their legal businesses.
PwC was the first Big Four to launch a dedicated legal services arm, PwC Legal, in 2014, followed shortly by EY and KPMG.
Deloitte completed the group with the launch of Deloitte Legal in 2018.
The push into the legal market was starting to look positive. In 2023, data by Saïd Business School revealed the Big Four generated $1.5bn (£1.25bn) in revenues from their legal segments.
The figures increased from $900m in 2015 to $1.2bn in 2017.
However, the cracks have started to show.
Cuts at EY Law
Last week, news broke that EY was making more cuts, this time for around 30 staff in its legal department, EY Law.
In a statement EY said: “These proposals would continue to strengthen EY’s existing legal capabilities in corporate law, company secretarial, tax litigation and immigration but would, regrettably, result in a reduction of roles across other areas of the UK Law business.”
This isn’t the first time EY has taken the shears to its legal arm. In December 2023, news broke it was shutting EY Riverview Law, the Manchester-based legal services business it acquired in 2018.
On top of that its headcount has fallen to around 160 after a series of high-profile departures, including nearly a dozen lawyers leaving for the City office of Hunton Andrews Kurth in December.
According to Scott Gibson, director of Edwards Gibson: “If we exclude Deloitte’s ill-fated lock-stock and barrel acquisition of 27-partner TMT boutique Kemp Little in 2021, between 2019 and 2024, the Big Four’s legal divisions combined hired 35 partners in London.”
“Against this, the quartet lost 40 serving partners (including two-thirds of the laterals who joined during that time) to rival law firms,” he added.
Big Four conflicts of interest
So, why are the Big Four not storming the legal market?
Christopher Clark, director at Definitum Search, says: “One challenge lies in the conflicts with the audit businesses, preventing a large number of legal instructions from getting off the ground.”
The Big Four’s bread and butter is their accountancy departments, which are tightly regulated by the Financial Reporting Council (FRC).
Plainly put, if the firm is auditing a business’s financials, the rest of its business can’t touch any work for that client.
Another issue is the structure of the Big Four firms. Nick Woolf, partner at Woolf&Co, highlighted that “however big their legal practice, they are always going to pale into insignificance compared to other parts of the firm.”
He noted the culture this creates explaining lawyers “who take pride in their own book of business, winning work themselves and seeing their own name in lights, are likely to be very disappointed by seeing none of these traits rewarded or even applauded in a Big Four firm.”
Woolf added that the Big Four had recruited the wrong partners for their needs.
KPMG is the outlier
Out of the Big Four, it seems KPMG is keeping its head above the water.
Gibson noted that the firm hired eight partners for KPMG Law UK in London versus just one for the rest of the Big Four.
“In 2024, whilst KPMG only managed to hire one partner in London, this was still 100 per cent more than the rest of the quartet combined,” he noted.
Speaking to City PM last July, the head of KPMG Law UK, Stuart Bedford, explained that the firm is not looking to challenge traditional Big Law on the likes of big corporate M&A deals. However, as he points out, there is a Venn diagram that overlaps with these firms and those deals.
“What we do is slightly different and tends to be the sorts of projects that actually those firms don’t really focus on,” he added.
This comes after KPMG revealed last month it launched KPMG Law US, the first law firm owned by a Big Four firm serving the US market.
A spokesperson for KPMG told City PM: “Whilst there is a lot of market uncertainty, we continue to grow and there are opportunities to help clients to not only remain compliant but optimise their businesses in a rapidly changing regulatory environment all while finding cost-effective ways of meeting their regulatory needs.”
An overview of the Big Four market, Gibson noted that firms “were able to sell themselves to lawyers with their ready made global networks, blue-chip client base, legendary organisational abilities, and gargantuan turnover.”
“In their numerous set-piece growth plans, the Big Four have themselves often conflated the volume of partner hiring from other law firms with success.”
He stated, “on that basis, with the possible exception of KPMG, the Big Four are failing.”
“If this was not already clear enough, unfortunately, EY’s latest retreat from Big Law in the UK is likely to make it even harder for the rest of the quartet to attract and retain quality lawyers – let alone rainmaker partners,” Gibson added.
A spokesperson for Deloitte Legal told City PM: “Deloitte Legal’s approach is blending legal expertise with our ability to deliver scale and leverage technology, alongside the broader range of Deloitte capabilities.”
“Our focus is on business solutions to the chief legal officer and becoming their business partner – a strategy that continues to resonate strongly with our clients and also with our people,” they added.
This comes as the Big Four firms have a profitability problem.
After two years of redundancies after redundancies, recent news showed the situation has escalated to the senior partnership. City PM has a long read on what is next for the Big Four.