Big Four goliath Ernst & Young (EY) announced it will be acquiring Riverview, a UK-based alternative legal service provider (ALSP). The deal has drawn considerable media coverage. “Big deal or big yawn?” industry pundits are asking. My take: This is another indication of an evolving, competitive, global legal industry. Not only are the Big Four’s footsteps becoming more rapid and loud, but they are burnishing their “legal” credentials by acquiring a Riverview, an ALSP that has long punched above its weight in part due to its charismatic CEO, Karl Chapman.
Roy Strom wrote an article for The American Lawyer suggesting in the title that a Big Four- branded competitor could be a "safe disruptor" in the legal industry. Fair assessment, although law suffers from "disruption fatigue." The global legal marketplace is looking for solutions that the Big Four are well-equipped to provide and the acquisition of Riverview adds a tasty dollop of "legal" topping. Liam Brown, Executive Chairman of Elevate, a Riverview rival, described the EY-Riverview hookup as “another validation of the alternative legal services opportunity.” Let’s add that the convergence tells the story of a maturing alternative legal services market and its enormous potential to better serve legal buyers, increase market share, digitize legal delivery, use capital, technology, and to harness inter-disciplinary expertise to provide scalable global services. The economic opportunity for ALSP’s (I prefer law company) was projected by Thomson Reuters and Adam Smith, Esq. to mushroom from $2B in 2015 to $55B by 2025. With that kind of credible upside—and the absence of incumbent heavyweight competition-- is it any wonder that the Big Four are leveraging their brand, global coverage, C-Suite relationships, expertise, and war chests and acquiring a small but well-known ALSP to burnish their "legal" credentials? As Nicholas Bruch notes, EY’s acquisition of Riverview may help facilitate further ASLP purchases by serving as a reminder to incumbents like UnitedLex, Axiom, and Elevate that they are now competing in the heavyweight division.
What Does It Mean to Provide Legal Services?
The Big Four are already a staple in legal industry discussion. Whether, when, and to what extent they—or other ‘alternative’ (to the traditional law firm partnership model) legal providers will ‘disrupt’ the industry is a popular parlor game. Entertaining as that banter can sometimes be, the real issue is what does it mean to provide legal services? This is where the EY acquisition of Riverview becomes more interesting. Short explanation: what was "legal" for generations has given way to a broader, inter-disciplinary, functional definition. "Legal" is no longer restricted to lawyers and "practice." Law is now about lawyers, technology, the business of delivering products and services, other professionals and paraprofessionals, new players, new structural and economic models, and new skillsets. It's a new ballgame.
The "legal profession" is becoming subsumed by the legal industry. Legal expertise is a part—but by no means the whole—of that industry. Consider that the EY-Riverview deal makes no mention of ‘legal expertise’ or "legal practice." It’s a big "legal’" story not focused on lawyers or law firms. That’s the real story of the EY-Riverview deal. The EY-Riverview headlines are a footnote to a tectonic industry change forged by corporate legal consumers. They are separating practice—an increasingly narrow band of regulated activities restricted to licensed attorneys—and delivery of legal services (everything else). This distinction is crucial, because legal practice was long synonymous with legal services. Until recently, lawyers determined what was ‘legal’ work, and law firms performed it (with limited direct responsibility assumed by in-house legal departments). No more. Legal consumers now make that call. That’s one reason why more and increasingly complex "legal" work has migrated from firms to corporate legal departments and law companies.
The functional definition of "legal services" has changed in recent years, and so too has the critical question of "who does what?" in the legal supply chain. Legal practice is shrinking as the business of law (legal delivery) is expanding. EY and its Big Four compatriots have wide, deep, ties to the C-Suite and procurement departments. Their demonstrated delivery capability and technological prowess, coupled with their vast scale and resources, are differentiators in an increasingly client-centric, value driven, and delivery-centric legal market. It is against this backdrop that the Big Four’s role in the global legal market—and EY’s acquisition of Riverview—is best considered.
The U.S. Regulatory Scheme is No Barrier for the Big Four
The U.S. is by far the world’s largest legal market by spend. Many U.S. lawyers take comfort from its outdated regulatory scheme that prevents "non-lawyer" ownership and investment in law firms. This once formidable protectionist barrier has been penetrated by consumers. They-not lawyers and regulators- interpret what it means to engage in legal practice. The Big Four have thus far respected the self-regulated legal industry’s vague guidelines and have not waded into the practice pool. But that does not mean that they are playing a cameo role in the U.S. legal marketplace. Consider that Deloitte, the last of the Big Four to secure a UK alternative business structures (ABS) license has the largest market share—just over 1%—of any legal service provider (including mega-law firms) in the world.
We are witnessing a slow motion legal revolution orchestrated by consumers. They evidence a growing willingness to acquire "legal" services from sources that either did not exist twenty years ago (Riverview, Axiom, UnitedLex, Elevate, etc.) or did not market their services as ‘legal’ (the Big Four, Accenture, and others). Don’t wait for a dramatic showdown between large law and the Big Four. This is a gradual shift in legal buying habits, one where market share will go to providers with required expertise, relevant experience, quantifiable results, "safe hands,"scale, resources, and consistent ability to drive value to consumers. Whether that is delivered by a "legal" provider or some other source is of no moment. That’s why the legal industry needs neologisms that replace outdated terms like "non-lawyer," "alternative legal service provider," and "legal work." "Lawyer" could be added to that list.
Alternative Legal Service Providers (ALSP’s) Have Outgrown Their Moniker—They are Mainstream
"Alternative legal service provider" (ALSP) is a widely-used, value-laden industry term in search of a common meaning. For some, ALSP’s remain synonymous with e-discovery and "back-office" shops that are throwbacks to the early days of legal process outsourcing. Strictly speaking, those providers fit the broad definition of ALSP’s -- companies that do not engage in the practice of law but handle certain disaggregated tasks formerly performed by law firms and once considered "legal" work. ALSP’s are "alternatives" to the traditional partnership model law firm and its concentration on "legal" expertise, structure, economic model, lawyer-centricity, and culture. Some ALSP’s—like the Big Four and other established "law-derivative" companies like UnitedLex and Axiom, now routinely perform large, complex "legal" portfolios.
Law firms were the dominant providers of legal services until the global financial crisis, rapid advances in technology, globalization, and digitization changed the buy-sell dynamic across multiple industries. Law has been a laggard, but a spate of recent studies reveals that the staid legal industry is increasingly receptive to ALSP’s as providers of legal services. That’s one reason why EY and its Big Four colleagues—themselves “ALSP’s”-- are making moves in the global legal marketplace.
The Big Four have acquired several law firms—albeit outside the U.S. for regulatory and other reasons. Deloitte UK, for example, entered into an "alliance" with Berry Appleman & Leiden (BAL) LLP, one of the world's largest immigration law firms, to leverage its scale, expertise and breadth outside of the US with BAL's legal immigration expertise in the US. This is regulatory circumnavigation at its finest. Deloitte has also acquired law firms in Austria and on the Continent. The Big Four giant established a foothold in North America in 2016 when it acquired “new age” law firm Conduit Law. That tie-up was short-lived, and the ‘partners’ parted ways eighteen months later.
KMPG, PwC, and EY have all made strategic acquisitions of law firms whose practice areas complement their existing service offerings. The image below provides insight to EY’s integrated global, one-stop shop, inter-disciplinary view of professional services delivery. Cornelius Grossman, EY’s Global Law Leader, minced no words in articulating the rationale of the Riverview deal: “This acquisition underlines the position of EY as a leading disruptor of legal services; it will provide a springboard for current EY legal managed services offerings and bolster the capabilities that we can help deliver for EY clients.” Other Big-Four members have similar models for bolting on legal expertise to their already-formidable suite of legal service offerings and will no doubt pursue smaller, established law companies like Riverview.
The “alternative” legal service market is consolidating-- expanding its expertise, delivery capability, war chest, brand recognition, and most importantly, ability to service clients. “Legal expertise” is conspicuously absent from the headlines. “Delivering legal services” is front and center. That’s the big story here, and it is emblematic of a changing notion of who, what, how, and at what price legal services are delivered. Practicing lawyers are not necessarily part of that process.
Conclusion
EY’s massive global footprint, human. technological, and process resources, client roster, and scale will scarcely be affected by the Riverview deal. It is important for another reason: EY is upping its ‘legal’ delivery profile and helping to reshape buyer notions of what and from whom it means to buy "legal services." Lawyers no longer dictate when and for what tasks they are required. That spells more provider options, greater scale, more investment in technology, a longer-term approach, and enhanced efficiency for legal buyers. It’s good news for buyers and a serious problem for all but a handful of elite, brand-differentiated law firms.
Govern Yourself Accordingly, law firm partner.
