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Who’s Still Afraid of the Big Bad Four?


Even before the COVID-19 pandemic struck, clients in Asia had been asking for differentiated legal services—from commercial value-adds to capped-fees and tech-infused solutions. 

So, it seemed timely when in 2018, the Big Four broke into Asia in a big way, launching new legal ventures and adding new service offerings. Private practice lawyers held their breath as KPMG, EY, Deloitte and PwC all touted a sea change that would enable them to seize market share from the notoriously intransigent global law firms. 

But fast forward five years, private practice lawyers are mostly relieved. The Big Four today are viewed as less of a threat than initially expected. While they have managed to attract a number of high-profile partners, some have already moved on. 

Their legal arms haven’t made a great splash in major M&A, private equity, capital markets and financing deals in Asia. They aren’t known for their disputes offerings. And they also haven’t demonstrated much success in building a formidable institutional clientele in the region. 

“The traditional law firm model is incredibly powerful in what it does, and in its connectivity into general counsel,” said Stuart Fuller, global head of legal services at KPMG. 

But the Big Four are learning. And over the past few years, they have sharpened their focus. 

“Typically, we are less successful when we are pitching for something that we can do but may not be highly differentiated on,” said Tony O’Malley, global legal leader at PwC.

O’Malley concedes that the Big Four have not been as successful as traditional firms in breaking into larger, conservative domestic companies that run law firm panels. They tend to excel, however, when multinational companies come into the region and need entirely new structures, products and services. And when conglomerates are going through major global restructurings, the Big Four’s spread of offices and breadth of offering across legal, tax, audit, strategy and management consulting also puts them in good stead, he said. 

PwC has also gained traction in Asia, O’Malley says, through advising financial sponsors and high-net-worth individuals who like to move quickly but lack internal legal resources. “These clients tend not to work with traditional panel structures, and so require a single point of accountability,” he said, 

Too Big a Solution

Traditional law firm partners are quick to point out that for the Big Four, opportunities tend to arise from outside the legal department and legal services are brought in later as part of the package but often as an afterthought. The Big Four leaders beg to differ, but they acknowledge that their true appeal comes with their ability to provide a broader offering across multiple platforms.

John Knox, EY’s Asia Pacific global legal managed services leader, says his team is working on a deal that came through from a financial institution seeking legal advice. “But really, we won that work because we could provide supply chain sourcing and vendor management advice in addition to legal support, he said. 

Knox added that his team is also doing work for one of the world’s largest corporations—”doing everything from legal advisory to operational project design, project management right through repapering awards, contracts and everything in between.” 

Indeed, all of the Big Four say their strengths are advising on transformative projects that involve not just a legal component but also require teams that can advise on tax, business and commercial strategy, and end-to-end technological solutions.  

“I know this myself from my own experience in traditional firms,” said O’Malley, who was a partner at King & Wood Mallesons for more than 13 years. Typically, once the deal’s completed, you go for lunch, you send the bill, and then you just hope they come back at some point for another deal.” 

But he says at PwC it’s different.

“We might do the lunch but the next day we’ll be in the office working with the client for six to 12 months on post-deal integration. We want to make sure they capture the value from the deal, so we tend to stay around a little bit longer,” he said.

Private practice lawyers in the region contend that therein lies the Big Four’s problem. Part of the reason they aren’t yet suited to succeed in Asia is that local clients aren’t ready for that sort of “big approach,” lawyers say. 

“For local clients, budgets still sit in different pots and it’s hard for them to conceive that to resolve a legal problem, they have to restructure entire departments,” said one Hong Kong-based partner at a Magic Circle firm. 

Pricing and Collaboration

The lack of transparency and control surrounding hourly billings has long been a point of contention between traditional law firms and their clients. 

While a bigger project handled by the Big Four may ultimately be more expensive, a more flexible pricing structure often also means that the legal component is priced very competitively, the leaders explained. 

“Our pricing is part of a broader proposal. If we’re supporting an infrastructure project or an M&A deal, we’re not the only one pricing that deal,” said O’Malley. “Often, there’ll be a strategy component, a tax component or commercial due diligence component. So there’s often a desire to give the client certainty through a single fixed or capped fee and potentially some risk-sharing on the downside.” 

“It’s not a one-size-fits-all model,” agreed Fuller. “One way you can look at it is that the legal aspect may end up costing less than hourly or even fixed fees at traditional firms.” 

The Pandemic Is a Double-Edged Sword

In some ways, the pandemic has highlighted the strengths as well as the prescience of the Big Four. With an armory of tech-infused capabilities and commercial solutions, the pandemic, at least at the onset, has given the Big Four an edge. 

“There is a belief now I think, in most organizations, that technology can play a big part in the way that they monitor obligations and monitor the market around risk,” said Fuller. “And we’re finding that the client’s appetite to engage with those technologies is really accelerated.” 

But the pandemic has also forced traditional law firms to transform and expedite their adoption of new technology. A raft of international and domestic law firms in Asia have already launched legal tech incubators and partnered or acquired legal tech solutions to offer clients more efficiency. 

A new wave of legal tech startups has also flooded into the region, creating another rank of competition. The ability to build chatbots and self-help tools for legal departments is no longer exclusive to the Big Four. 

On the brighter side, though, the prolonged effects of the pandemic have also served up a series of new opportunities primed for the Big Four. Over the past year, consumer health giant Johnson & Johnson, Japan’s Toshiba Corp., and energy conglomerate General Electric have announced major business splits and restructurings—all of which is arguably work that is best suited for a combined consultancy offering.  

Rashed Idrees, global managing director at Deloitte Legal, says his team has already been advising on such megadeals. “We have been fortunate enough to advise on some of the largest multi-jurisdictional corporate restructuring and M&A deals in the region, on infrastructure and natural resources projects, and in our new law and technology space,” he said. 

A Forbidden Goldmine

One major impediment faced by the Big Four is its inability to operate legal services in the U.S., as this has diminished work that would otherwise be considered low-hanging fruit in Asia. 

According to Fuller, KPMG has had to be very clear to its clients that it is not allowed to offer legal support in the U.S. and will have to appoint local law firms to cover that region. Deloitte, too, has a dedicated pool of American law firms that it works with, according to Idrees. The firm has established separate teams to address potential opportunities in the U.S. 

But the Big Four’s use of local law firms is not limited to the U.S. Elsewhere in the world, the four firms also are far more willing to collaborate with local law firms. KPMG, EY and PwC have all co-pitched and co-counseled on matters in Asia and in Europe. 

“The way we see it, there’s both competition and collaboration between providers on a legal panel,” said Fuller, who added that KPMG has done pitches with law firms when it believes that together they can offer the best team to help solve a client’s problem, and when the collaboration will help win the mandate. 

“In a strange way, I think maybe the Big Four is more open to doing that than big law firms,” he said.

ESG Paves the Way 

There is consensus among the Big Four leaders that work in the environmental, social and governance (ESG) space will highlight and differentiate the Big Four’s capabilities. 

For example, coming up with an integrated solution, which the Big Four are known for, is essential to meet clients’ ESG demands, O’Malley said. 

“There’s a heightened sensitivity with corporates about how they’re going to continue to attract both investors and customers based on their brand and reputation around ESG. And we find we can really own that space, both in terms of being able to understand and measure their performance across ESG. 

“Auditing that and looking at their governance structures around renewable energy and carbon footprint—there’s just a whole gamut of things we can bring to the table,” he explained. 

This approach seems to be working. Deloitte Legal is currently advising an Asia Pacific-headquartered business on its investment in an ESG fund in the U.S. And PwC is advising on a renewable energy build between Australia and Singapore—a project that is part of a movement toward net-zero carbon emissions.

“I look at a project like that, where we’ve got into integrated advisory teams across infrastructure, tax and legal,” said O’Malley. “We take a long-term view on the project, we take risk on the project. It’s the sort of offering that based on my 30 years in the industry, traditional firms wouldn’t be able to take on.”

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