'A Lot to Offer This Market': KPMG Shares Goals for US Law Firm

"We think KPMG has a lot to offer this market," Tom Greenaway, the designated principal for KPMG Law US, said in an interview. "We now hope to be able to deliver that standardized deliverable, and that quality at scale, through the legal market."

The firm, Greenaway said, "has been investing billions of dollars over decades in building out our platforms, our networks, our capabilities and our investments in technology," all of which has been in service of delivering better quality work and more efficient client services.

Before getting approved to operate KPMG Law U.S. in Arizona, the accounting firm says it had for years considered taking this step here in the U.S., one that it already previously took in the U.K. and Australia, two overseas ABS jurisdictions.

"We have been actively building our network of member firms around the world for more than a decade," Greenaway said. "We have hundreds of attorneys in KPMG LLP today, and many of them have expressed interest in helping us build out this new offering."

News of KPMG's approval to run a law firm in Arizona has some industry insiders questioning whether the Big Four firm has any ulterior motives outside of broadening the scope of professional services for existing and potential clients, but KPMG principals insist they remain committed to offering clients a streamlined experience.

'Strategic Imperative to Grow Profitability'

Nonetheless, what may look like a better experience for clients from KPMGs perspective may take on a very different shape when viewed from the eyes of Am Law 100 managing partners.

Most Am Law-rated firms have a strategic imperative to grow profitability relative to their competitors, and to the extent that KPMG starts to successfully recruit teams of laterals and build out its competitive practices in certain areas of the law, more of Big Law may begin to view KPMG as a serious competitor, said Kent Zimmermann, a legal industry consultant with Zeughauser Group.

Some of those practice areas include M&A, private equity, finance, sophisticated litigation, investigations and regulatory," Zimmermann added. "So far that hasn't happened, so most of Big Law is monitoring this from a distance and will stay focused on their strategic priorities."

Some observers question KPMG's motives, namely because the firm's stated desires do not necessarily seem to comport with the goal of expanding access to justice, often a driving factor behind the launch of ABS programs.

Access to justice is an issue that typically relates to those individuals seeking legal services who live below the poverty line, and some ABS programs are more geared toward consumer law issues, such as landlord-tenant disputes.

But KPMG clients are not typically those individuals, but rather larger business clients, said Ed Estrada, managing partner with Gradient Legal Consulting who is also an adjunct law professor at Cornell Tech, and who previously spent 25 years as a practicing attorney, including serving as a partner at Reed Smith.

One idea behind allowing nonlawyer ownership of law firms, Estrada said, is that it could open up the door to a flow of capital that can help accelerate the development of technology that would allow all people, regardless of means, to participate in the legal system.

KPMG acknowledged the access to justice component, saying it is committed to help strengthen the Arizona legal community.

"We have already started our outreach to law schools and others in the legal services community in support of that commitment," a KPMG spokesperson said. "As a wholly owned subsidiary, KPMG Law U.S. will continue this tradition of service and community investment while bringing innovative legal solutions to clients both in Arizona and across the U.S."

Greenaway did say that he believes KPMG has strengths that it is bringing to the legal market, and the firm recognizes the market's competitive nature, adding "We are not looking to displace existing, successful relationships that clients have with their existing legal service providers."

Disruption to Big Law

At this point the potential impact or disruption to Big Law remains to be seen, although one leader of an Am Law 100 firm said KPMG's entry into the legal market should be taken seriously.

"You can't deny that an extremely well funded, well organized, well managed business like the Big Four accounting firms will not be legit competitors," said the law firm leader, who spoke on the condition of anonymity. At the same time, he said, law firms have been competing with each other for years, so competition is really nothing new.

KPMG has stated that while its ABS license allows it to operate a law firm only in Arizona, it still plans to service clients on a national scale, likely through the use of co-counsel relationships, again raising the issue of competition.

But the law firm source said he envisions the possibility for state bar associations to challenge any legal work that goes beyond Arizona's borders, since it may be viewed as an improper stretching of the state's ABS license.

Greenaway told The American Lawyer that the "time is right now" for starting up the law firm subsidiary for numerous reasons, including the ability for attorneys to practice law temporarily outside of their home jurisdiction "and to extend the reach of their firms."

"It's something that the bar has been working on for a very long time. Going back to the '80s, the legal industry has employed staffing companies and outside legal service providers to help the attorneys inside a law firm enhance their competence," Greenaway said. "When attorneys in a firm affiliate with others through a co-counsel arrangement, they can expand their competence and we're seeing that already in our conversations with clients."

Greenaway stressed that in no way would KPMG Law U.S. look to open any offices outside of Arizona, and that it's completely committed to a headquarters in Phoenix.

"We are a competitive organization, and we'll compete where it makes sense," Greenaway said. "We want to play at scale in a way, candidly, that existing legal service providers are not doing today, so we feel like there's plenty of opportunity for us."

The organization's existing advantage in scale is clear: while KPMG is the smallest of the Big Four firms, it still has 275,000 partners and employees across 135 countries. Compare that to Dentons (ranked third on Law.com's Global 200, trailing two China-based law firms), which in 2023 had just under 6,000 attorneys across 84 countries.

Of course, there are some things that could possibly be a hindrance for KPMG Law U.S., such as the accounting firm's mandatory retirement age of 60 for partners and principals, said the Am Law 100 firm leader.

How it's possible for KPMG to operate a law firm within those retirement restrictions is anyone's guess, he said.

"There are a lot of interesting dynamics before we really see what the reality is," he said.

A KPMG spokesperson confirmed the mandatory retirement age of 60 for partners and principals, and said any wholly owned subsidiary of KPMG would be governed by the same policies as the parent company.

"KPMG maintains consistency in its core governance standards across all KPMG entities," the spokesperson said.

Leveraging Its Global Strength

At this point, one thing remains clear: KPMG has the benefit of being able to leverage its global strength and also leverage the legal technology it has developed over the years to better service legal clients under Arizona's ABS structure, said Estrada, of Gradient Legal Consulting.

"People have thought for years, what if U.S. law firms had to compete with the Big Four. Now that's becoming a reality. It's hard to say what KPMG's business strategy will be," he said.

Estrada said only time will tell how much competition will be created between KPMG and Big Law, and it may be dependent upon how KPMG chooses to operate its ABS structure.

The accounting firm, he said, could possibly position itself as a "mega ALSP," referring to alternative legal service providers.

Like ALSPs such as Elevate and Axiom, KPMG is trying to provide business solutions to its clients that cut across both legal advice and business know-how, Estrada said, "and that can be a very, very compelling proposition to clients."

"Their attraction is going to be to the higher volume, most likely lower-rate type of work, which is where they can compete and likely build market share to develop those high-end litigation practices, or high-end transactional practices," he said

Competing with law firms for work also means KPMG competing for talent, which often drives salaries in the seven or even eight figures, Estrada said, so the goal will be to attract the right talent and then develop greater client trust, a reputational issue that many law firms have spent decades establishing in both the courts and the business market.

At KPMG, Greenaway said the advantage of operating a law firm is that existing clients are already familiar with the firm, and the firm is familiar with their businesses.

"It sometimes may be that a client wants a specialized and relatively small legal team to handle a specialized and relatively small legal matter, but when a legal question spans an entire business, and an entire global business, we're finding that clients appreciate the fact that KPMG, thanks to all of our existing consulting relationships, knows that business better than perhaps a new legal service provider who they'd have to introduce into the team," he said.

When the Arizona Supreme Court approved KPMG as an ABS law firm, its order included a stipulation that the firm would not be permitted to service its audit clients, but Greenaway said KPMG had already developed its own, internal commitment to the same previously, so the restriction is not a hindrance.

At this point, it's not entirely clear whether the other three Big Four accounting firms will consider moving into the legal space in Arizona.

Representatives for Deloitte and EY didn't immediately respond to requests for comment, and Greenaway declined to speak about the other three Big Four firms and their possible plans.

"Obviously, we don't comment on our competitors," he said. "Certainly, for our sake, we hope this will be a successful step for us and allow us to gain closer connections and broader teams with our clients."

Jane Allen, a principal with PwC and the firm's U.S. legal business services leader, told The American Lawyer that the firm is committed to staying at the forefront of the evolving legal industry, and that while the firm currently has no plans to seek an alternative business structure license in the U.S., "we remain confident in our ability to deliver unparalleled service through out existing model."

"Our integrated approach and member firm collaboration already enables us to serve our clients with the same efficiency and strategic insight that others are aspiring to achieve in this space," Allen said in a statement.

The original version of this story was published on The American Lawyer.