Legal Business

New Law meets Big Four – Has Deloitte got the conviction to match its free-thinking legal pitch?

New Law meets Big Four – Has Deloitte got the conviction to match its free-thinking legal pitch?

Thomas Alan asks if Deloitte can find a new angle on legal services

The often cited but seldom-seen legal arrival of the Big Four has long passed into a professional joke, though renewed investment from the major accountancy groups in the last three years has given the debate fresh urgency. But, truly, something must have changed in the wind, as even that traditional hold-out, Deloitte, has signalled its intention to build a significant law presence.

Legal Business

Accountants keep coming as Deloitte hires A&O banking partner as UK legal head

Accountants keep coming as Deloitte hires A&O banking partner as UK legal head

Deloitte has made a clear statement of intent in legal services by announcing today (14 January) that it has lured Allen & Overy (A&O) banking partner Michael Castle across to lead its UK legal arm, as the Big Four outfit looks for greater traction in the legal sector.

Based in Deloitte’s London office, Castle will now lead a technology-orientated legal offering for Deloitte, having spent more than two decades at A&O. Becoming an partner in 2007, Castle was not a standout name in a finance department replete with leading individuals but did gain profile in recent years after unsuccessfully running for the managing partner role at A&O, before eventually being beaten by current leader Andrew Ballheimer.

Deloitte revealed its ambitions on the UK legal market in January of last year, when the firm became the last of the Big Four to become an alternative business structure. The firm will now have to make up for any ground lost to its three rivals, with PwC, KPMG and EY all having a more established legal presence in the UK.

Currently, Deloitte has 2,500 legal professionals operating across 85 countries in the world, while in the UK it has over 50 practising lawyers and over 125 other fee earners, with both figures likely to rise this year. The hire of Castle, rather than a regional managing partner or general counsel, gives an indication of Deloitte’s intention to enter the legal mainstream moving forward.

thomas.alan@legalbusiness.co.uk

For more on the rise of the accountants in legal services, read ‘Who’s afraid of the Big bad Four?’

Legal Business

‘Not another mid-market law firm’: Deloitte to make much-anticipated foray into UK legal market

‘Not another mid-market law firm’: Deloitte to make much-anticipated foray into UK legal market

Often trumpeted as a potential disruptor to the UK legal market, the last of the Big Four accountancy firms, Deloitte, is primed to enter the fray as an alternative business structure (ABS).

The global professional services giant confirmed yesterday (10 January) that it would be using technology such as automated document review and contract management to underpin the new legal offering. In addition, Deloitte will be launching a consulting service to help in-house legal teams get the best out of technology.

Deloitte will therefore apply for an ABS licence, with the firm intending to begin offering new legal services ‘early this year’.

Deloitte will enter the market well behind its three rivals, with PwC, KPMG and EY all possessing an established legal presence in the UK. PwC has by far the strongest legal offering, with a UK headcount of 320 and UK revenues of £60m. EY has around 85 UK lawyers while KPMG has approximately 100, with UK revenues of roughly £15m and £20m respectively.

Piet Hein Meeter, global managing director of Deloitte Legal, told Legal Business: ‘We have always monitored the legal market in the UK, and we already have a presence in around 80 countries. But we wanted to avoid bringing another mid-market law firm to the table. We have now developed something where we have positioned ourselves in-between the alternative providers and the traditional providers. It is unique, we are the first provider to bring a full spectrum of services, including both legal and compliance.’

When asked about Deloitte’s ambitions for the UK market, Meeter said: ‘It will be substantial. It has to be meaningful to satisfy our clients.’

He confirmed that an immediate priority was to hire a senior partner, in order to satisfy the SRA’s requirements for attaining an ABS.

Matt Ellis, Deloitte’s managing partner for tax and legal, added: ‘We don’t want to replicate a traditional law firm. We’re planning to use our technology and advisory skills to transform legal services and help address many of the challenges lawyers, whether in practice or in-house, are facing in today’s increasingly complex legal environment. By automating repetitive processes and completing routine tasks in a fraction of the time, lawyers will be able to spend more time on specialist areas.’

The new consultancy arm, being launched in conjunction with the legal business, will comprise of over 100 professionals across ten countries. Meeter said that a 2016 survey carried out by the accountancy firm showed that ‘62% of legal counsel, general counsel, CEOs and CFOs are looking to significantly review and transform the way in which their legal function operates.’

During 2017, PwC mounted a sustained a campaign to broaden its legal offering, launching a law firm in Washington DC  as well as a Lawyers On Demand-esque contract lawyering service .

tom.baker@legalease.co.uk

For more on the Big Four’s assault on the UK legal market, read ‘Who’s afraid of the big bad four? Inside the accountants’ assault on law‘.

Legal Business

Top 100 firms defy Brexit upheaval with confident performance in first quarter of 2017/18

Top 100 firms defy Brexit upheaval with confident performance in first quarter of 2017/18

A lack of clarity on the state of Brexit negotiations together with tougher macroeconomic conditions don’t seem to have impacted the UK top 100 law firms which posted an average 8.5% increase in fee income for the quarter ending July 2017.

Deloitte’s quarterly legal sector survey showed the growth was largely due to a 7% increase in fees-per-fee earner at the country’s top players. However, despite this top-line growth, the growth in chargeable hours per fee earner at the top ten UK law firms was lower at 3%.

Players in the 11-25 bracket saw the biggest increase in fee growth of 10.5%, despite seeing a 3.5% increase in chargeable hours per fee earner.

Conversely, firms in the 26-50 and 51-100 categories reported the largest increases in chargeable hours per fee earner of 4% and 5% respectively while the increase in fee income for the 26-100 group was 7.8%

Currency impact accounted for some of the disparity, with the top 25 benefiting more from the weak pound due to larger international operations.

‘It was a strong quarter – stronger than some people predicted,’ Deloitte partner Jeremy Black told Legal Business. ‘Activity has increased across most practice areas.’

‘As a result of the Brexit vote there has been uncertainty for some time, but businesses have started to feel that it is not necessarily the right option to wait and see what happens. And on the private equity side, a lot of funds have a lot of money to invest.’

Management at the firms surveyed by Deloitte also revealed wary optimism for the rest of the year, with the top ten predicting an average 4.9% growth for the financial year ending in April 2018. Optimism was strongest among firms in the second half of the table, which expect an average growth of 6.7% on the 2016-17 financial year.

marco.cillario@legalbusiness.co.uk

Legal Business

A&O teams up with Deloitte for pioneering joint venture targeted at banking giants

A&O teams up with Deloitte for pioneering joint venture targeted at banking giants

Axiom and Ashurst follow with similar service to meet regulations

In the first marquee joint venture between a Magic Circle firm and a Big Four accountant, Allen & Overy (A&O) and Deloitte have teamed up to create a tech-driven service to help banks handle post-Lehman regulation.

Legal Business

Magic Circle meets big four – A&O teams up with Deloitte for pioneering JV targeted at banking giants

Magic Circle meets big four – A&O teams up with Deloitte for pioneering JV targeted at banking giants

In the first marquee joint venture between a Big Four accountant and a Magic Circle law firm, Allen & Overy (A&O) has teamed up with Deloitte to create a tech-driven service to help banks handle post-Lehman regulation.

The new service – dubbed MarginMatrix – will deploy automation to help banks address incoming global regulation of the $500trn over-the-counter (OTC) derivatives market. The rules under the European Market Infrastructure Regulation (EMIR) framework will require counterparties for derivative contracts not processed through an authorised clearing system to provide additional margins for their net exposures.

The reforms – which A&O estimates will require a large banking group to provide around $10bn initially in additional margin alongside thousands of new contracts – are a major compliance challenge for the securities industry and potentially a lucrative product line for advisers.

MarginMatrix codifies legal regimes in multiple jurisdictions and automates the drafting of documents based on computer-assisted analysis. A&O claims the system can create a document that would conventionally take three lawyer hours in just three minutes. On its estimate, the 10,000 OTC contracts a major bank would normally hold can be processed in 12 weeks with one person deploying the system, against 15 years of lawyer hours.

A&O will run the programme and provide legal input, while Deloitte will provide project management to large teams of negotiators in multiple jurisdictions.

A&O derivatives partner David Wakeling came up with the concept. He said the programme ‘will allow [major banks] to carry on trading derivatives without worrying that they may be, for example, complying with the US rules, but they’re not compliant with the Singapore rules. What we’re doing is gold plating all the regimes and making sure their trading relationships works all over in the world.’

After finishing a prototype of the programme in June last year, A&O approached Deloitte with a proposal in November. Wakeling (pictured) added: ‘We thought that it was all very well that our system would spit out a beautifully crafted legally compliant document, but it would probably be negotiated and there’s a lot of work around execution. We started talking to Deloitte and said: “You’re very good at large scale, disciplined projects.” The scale is thousands and thousands of contracts in multiple jurisdictions, so it’s the managed services arm coming in from Deloitte.’

A pioneering tie-up of a leading accountancy group and an elite global law firm on a high stakes project will be seen as a significant development for the legal industry and further bolster A&O’s progressive credentials after previous initiatives such as its flexi-lawyer arm Peerpoint and its suite of online services, aosphere.

A&O senior partner Wim Dejonghe commented: ‘MarginMatrix is an example of the way in which we are evolving our offering in the face of changing client needs. We foster a culture of entrepreneurialism and risk-taking, which enables our partners to deliver market-leading initiatives like this one.’

The new OTC regulation was expected to come into force on 1 September but the European Commission last week said the implementation deadline would move back, with a likely date in the middle of 2017, though US implementation will happen in September.

Wakeling said the reaction to the project has been positive. Six global banks have already signed up to the service including one ‘Bulge Bracket’ house. ‘What became very clear very quickly is that this is exactly what they needed. This is a very worrying thing to have global regulations kicking in this year in lots of regimes which are very complicated and a system and a process was exactly what they needed,’ Wakeling told Legal Business. ‘We very quickly picked up quite a lot of clients. It’s become a very significant business for us.’

Around 20 A&O partners are dedicating ‘significant’ time to implementation. A&O’s London derivatives partners Emma Dwyer, Guy Antrobus and Paul Cluley worked with Wakeling through the programme’s creation. Hong Kong derivatives partner Ross Stewart and regulatory/capital markets partner Yvonne Siew, Singapore capital markets partner Matthew Hebburn, New York derivatives partners Deborah North and David Lucking, and Washington DC-based partner Bill Satchell have also been involved.

Deloitte’s team working on the project includes its New York, Hong Kong and London offices. Its team is led by partners Hugo Morris and Katelyn Brown.

Morris commented: ‘MarginMatrix’s ability to codify the law across multiple jurisdictions, auto-draft contracts and provide a controlled workflow environment for contract negotiations will lead to significant cost savings and help maximise institutions’ ability to achieve regulatory compliance.’

madeleine.farman@legalease.co.uk

Legal Business

Robot law: Deloitte estimates automation to cut legal sector jobs by 39% over the next two decades

Robot law: Deloitte estimates automation to cut legal sector jobs by 39% over the next two decades

A new report released by Deloitte is warning law firms to prepare for changes as the rise of automation is likely to cut legal sector jobs by 39% over the next two decades.

The report titled ‘Developing legal talent: Stepping into the future law firm’, predicts that more than 100,000 roles in the legal sector will be at risk over the next 20 years as advancements in technology and machines will transform the profession.

According to the report ‘firms must have a clear strategy for dealing with these changes now if they want to remain competitive and ensure they attract the best talent to support their business.’

The report also said the legal profession will be radically different in the next decade, and have ‘fewer traditional lawyers’ and ‘a new mix of skills among the elite lawyers’. In addition, there will be greater flexibility and mobility within the industry, a reformed workforce structure and alternative progression routes, and a greater willingness to source people from other industries with non-traditional skills and training.

Many firms are already amending their models in preparation for the changes to come. In August last year, Dentons’ NextLaw Labs – which was launched to develop new technologies for the legal profession – invested in an IBM Watson app that has the ability to process natural language, so can answer questions, sift through legal documents, research and return an evidence-based answer.

Other firms are streamlining their IT functions; at the end of 2015, Freshfields Bruckhaus Deringer closed its global IT and helpdesk function in Germany in favour of its new Manchester back-office centre.

RPC director of knowledge management and capability Andrew Woolfson said firms should embrace the advancements. He said: ‘It’s about augmenting lawyerly skills. Software providers and AI gives firms the opportunity to use legal tools that do things and run processes in a much simpler way.’

Woolfson added: ‘The title of legal secretary might change, it may be more of a metric or data analytic role, but it will just be a continuation of where we are today.’

Slaughter and May senior partner Chris Saul commented: ‘Technology is of course playing an increasing role in the provision of legal services. However, clients will surely continue to look for human intermediation of the technology and for bespoke advice from talented lawyers on more complicated matters – making use of evolving technology where appropriate.’

jaishree.kalia@legalease.co.uk

Subscribers can read more in: ‘Deep Blue sky thinking: The cutting edge of legal AI’

 

 

Legal Business

Income up for the top 100 law firms but top 10 see slide as Deloitte records differing fortunes in the first quarter

Income up for the top 100 law firms but top 10 see slide as Deloitte records differing fortunes in the first quarter

Accountancy giant Deloitte has recorded reduced fee income for the top 10 UK law firms in the first quarter of 2014/15, with a 2.7% fall as a result of a 2.1% decrease in fee earner headcount alongside a decline in sterling rates as a consequence of the strong pound.

Deloitte’s quarterly legal sector survey results showed that the top 100 UK law firms overall achieved a fee income increase of 6.1% compared with the same quarter last year, a hike that was largely driven by merger activity in the last twelve months.

The quarter saw differing performance levels across the market, with those firms ranging in the 11-25 category faring better than the top ten, and achieving average growth in fee income of 6.2% which was due to increases in chargeable hours per fee earner of 3.5% alongside some improvements in rates.

Jeremy Black, a partner in Deloitte’s professional practices team, said: ‘The market for firms in the 26-100 size category continues to be tough with growth coming from mergers and lateral hires rather than increases in use or rates. While exchange rate movements have hit the global firms this quarter, we would expect the performance of the top 25 firms to improve as the economy picks up. This will continue to widen the gap in underlying performance between the larger and smaller firms’.

sarah.downey@legalease.co.uk

For more insight on top 100 UK firm performance, see the LB100: 2014

Legal Business

Deloitte plots legal market assault with appointment of global managing director

Deloitte has become the last of the Big Four accountancy firms to announce plans to re-enter the legal market with the appointment of Rotterdam-based Piet Hein Meeter as global managing director of Deloitte Legal.

The move will see Meeter, formerly chief executive of Deloitte in the Netherlands, build an international legal practice.

‘Deloite Legal will build on the international trend towards integration of process, technology, and deep legal capability,’ Meeter says on his LinkedIn profile.

Having officially started with Deloitte Legal in early June, Meeter plans to develop technology-enabled global solutions by integrating tax and legal with technology to ‘deliver bundled solutions to clients with complex critical challenges.’

Meeter, who joined Deloitte as part of the firm’s takeover of Arthur Andersen, stepped down as chief executive, according to Reuters, after ‘breaking internal rules on owning stakes in companies whose books are audited by the accountancy firm.’

Meeter did not take any decisions about the stakes he held nor was he involved in auditing companies in which he held stakes, Reuters added in its report in March 2012.

He was re-appointed as global managing director of tax & legal and corporate development & strategic growth in August 2012.

Meeter’s appointment is the latest effort by the Big Four to take on the legal market and follows an announcement last week that EY has made its third senior private practice hire in three months, as Freshfields Bruckhaus Deringer partner Richard Norbruis joins to lead its global transaction law practice. Norbruis follows Berwin Leighton Paisner’s former head of finance Matthew Kellett, who will spearhead EY’s financial services legal work from September onwards. In March EY recruited Addleshaw Goddard’s corporate managing partner Philip Goodstone to boost its UK legal capability.

Neither Deloitte or Meeter were available for comment at the time of writing.

Sarah.downey@legalease.co.uk

Legal Business

Mergers push the top 100 firms back into double digit growth

A wave of consolidation in the UK legal industry has sparked double digit growth among the top 100 law firms for the first time in five years.

The latest Deloitte quarterly legal sector survey today (13 September) revealed a 10.5% increase in fee income generated in Q1 (ending 31 July) compared to the same period last year.

The growth was boosted by mergers within the sector, which accounted for approximately half of the fee income increase, with the balance due to an increase in general market activity.

The highest growth in transactional activity was in the second quartile 26-50 range, which saw growth of 14.6%. This was followed closely by the 51-100 category, which saw a 13.4% increase in activity.

Billable hours per fee earner remained broadly flat on the previous year, with just a 0.3% rise for the 26-50 category and 1.2% for firms in the 51-100 range. However, in an indication that pricing pressures have eased since last year, fees per fee earner saw a 3.5% increase among 26-50 bracket firms and 2.3% in the 51-100 category.

‘This has been a very positive quarter for law firms with the sector achieving underlying growth averaging around 5%. Firms’ property and corporate departments have generally had strong quarters with the more positive macroeconomic environment feeding through to higher levels of activity,’ said Jeremy Black, a partner in Deloitte’s professional services practice.

‘Merger activity continues apace, particularly in the volume space and outside of London where markets remain tough and law firms continue to face a number of challenges. Consolidation outside the top 25 firms has led to significant growth in average fee income and fee earner headcount,’ he continued.

Law firms are correspondingly more confident about the outlook for the coming financial year, forecasting an average fee income increase of 5.1% for 2013-14, with an increase of 4.2% for the next quarter, the report finds.

This summer, Legal Business 100 analysis found that while the year-on-year performance of the second quartile of firms may be collectively stronger than some of the elite firms in many respects, individually some of the 26-50 firms have had tough years as mediocre financial performance and failed merger talks have taken their toll. For some, simply not boosting revenues by virtue of a merger has seen them eclipsed by rapidly expanding rivals, with Holman Fenwick Willan nudged out of the top 25 altogether, despite enjoying an impressive 14% leap in turnover this year to £141m.

 

david.stevenson@legalease.co.uk