In the last few weeks, my LinkedIn feed has been full of talk of how the latest NewLaw move (EY purchasing Riverview Law) is a massive sign of the market shifting. My email inbox and conversations with general counsel have shown the other side to this story, which ranges from indifference to a collective shrug of shoulders.
One law firm partner suggested that this deal was symptomatic of the divide between talented people vs smart technology, and suggested that the latter is the key driver of the in-house department. I’m not so sure about that, but what we have seen from legal tech is that the key players are much better at marketing themselves than the traditional service providers. Riverview is a great example of that – there has rarely been a conference in the past two years that hasn’t featured Karl Chapman evangelising about how consumption of legal services has changed forever.
Compelling stuff, some would say, but when you look at the numbers, it tells a much more traditional tale – that change in legal is like turning round an oil tanker. Riverview’s turnover last year was estimated to be around £10m, with a suggested equal amount in losses over the previous five years, with 120 employees and pretty significant costs. Putting that into perspective, where does that position it in comparison with traditional legal services? Turnover is less than half that of Payne Hicks Beach, who prop up the LB100 table in the UK, and a world apart from Cozen O’Connor who sit at number 100 of the Global 100 with a $416m turnover.
But, the new breed argue, that was then and this is the new now. EY is a huge global business that can take on the traditionalists. Yes, EY is big – $31.4bn in revenue and a quarter of a million employees – but let’s go a little deeper, and be fair to EY, let’s expand it out to all the Big Four from The Legal 500’s perspective. Taking out the biggest market, the US (and the issues the Big Four’s legal arms face there are for a whole series of articles), we will have to focus on the UK.
PwC Legal is ranked in 14 areas (including two top tier rankings for immigration and for M&A under £50m), and is by far the strongest. KPMG Law gets a solitary ranking for tax disputes and investigations, and Deloitte and EY are not ranked at all. Yes, the rankings tend to reflect the traditional practices, but it is based on interviews with over 50,000 clients and the Big Four rarely get mentioned. But you may argue, the Big Four legal arms are entering a new territory, they have learned from their dalliance with this almost two decades ago, and they can scale up, right?
Chris Price, EY’s global head of alliances, said that the plan is to increase staff numbers from 100 to 3,000. I would question how any organisation can do that quickly, with the kind of quality of staff required, and the integration into the firm’s culture – on top of another integration of firm culture from Riverview. And we haven’t even covered the issues that will inevitably come up with conflicts.
Perhaps I am being unfair to NewLaw and the EY/Riverview deal in particular, but we have to take from practical examples. The reality is that how companies like this deliver legal services is very different to the offerings from law firms. The big question that general counsel will have to try and answer is how much of this will replace traditional services, and how much will create even more costs for in-house? Spend at law firms shows no sign of slowing down with record figures being announced across the board, more and more legal tech is springing up, (much of it struggling to show how it will reduce spend from law firms) and increasing talent wars mean that in-house departments are having to spend more and more to get the best people.
Mark Cohen states: ‘The staid legal industry is smitten by “innovation”… efforts to change the legal industry garner headlines, but there’s plenty of resistance.’ Headlines can be gained, but corporate finance hacks around the world are not waxing lyrical about the capabilities of the Big Four, over the white shoe and magic circle firms. It is more interesting to write about innovation – despite often not knowing what it really is – AI, automation and how the legal industry is being disrupted. The legal press would be relatively dry if it could only cover the dozens of deals done each day that, while complicated and expensive, often can be very similar. But just as we often can’t write about disputes or arbitrations, or mediations due to strict confidentiality clauses, it doesn’t make them any less important. But we come back to the question: how much is the legal market being disrupted?
The Economist suggests that modern day disruption needs two factors to occur – ‘the speed at which disruption is happening and the way in which companies are preparing for and managing it.’ As we have already seen, the speed of literally anything in the legal industry is glacial. Yes, the ice caps are melting and speeding things up, but it is still slow progress. It is the latter part that interests me. How many firms are launching innovation hubs, bringing low cost alternatives into their existing model, employing chief innovation officers? There is little evidence of a revolution happening, but a gradual evolution. Law firms are doing what they do best, which is take the very best ideas, adapt them for their own purposes (sometime, not always, at the expense of their clients), and move the dial just enough to keep their clients happy-ish, with the understanding that change is too disruptive and takes too long to be worthwhile. In my last column, I talked about legal ops wanting to try and take law firms’ lunch. Perhaps we should be looking at this as NewLaw can be tempting as a snack, but BigLaw is fully in control of your daily diet.