Accounting firms making ‘serious noise’

Deloitte’s acquisition of document review company ATD Legal Services PC is only the latest move in a trend that shows accounting firms are “making serious noise” about tapping into the legal industry, an Ottawa-based industry analyst says.

Accounting firm Deloitte says it’s advancing its Canadian financial forensics work through the acquisition of ATD Legal Services. The move means large-scale document review and analysis have become part of Deloitte’s services and clients won’t need to go to third parties for assistance in that area, according to Peter Dent, who leads Deloitte’s forensic services practice in Canada.

Document review will now be an extension of the financial data gathering work Deloitte already does for law firms as part of its expert witness services.
“They [ATD] were service providers to law firms just like we are as part of our discovery practice, so it’s basically adding a next stage or step we did not currently have in our practice,” says Dent.

“We’re basically internalizing this process. So for the purpose of our clients, they only have to go to one vendor. They don’t have to go to multiple vendors to have the discovery process met,” he adds, noting the company now provides “end-to-end” discovery solutions.

This isn’t the first time Deloitte and other accounting firms have brought lawyers and other legal services into their business model to create what they call a one-stop shop for their clients. According to Jordan Furlong, principal at Ottawa-based consulting firm Edge International, the legal industry has a lot to learn from the accounting firms as they broaden their services to respond to client needs.

In September 2013, Deloitte LLP announced its alliance with immigration law firm Shouli & Partners LLP. The joint venture would enable Deloitte LLP to provide business immigration services to its clients, the firm said.

“We’re excited by this alliance and what it means for our clients,” said Heather Evans, Deloitte’s national managing partner for tax, at the time. “S&P’s legal services complement our existing tax practice, which means we can now offer a one-stop shop to address the complex business immigration requirements associated with a global operation.”

The year before, KPMG LLP announced that Greenberg Turner, an immigration firm, had joined KPMG Law LLP. Elio Luongo, KPMG’s Canadian managing partner for tax, used the same phrase — “one-stop shop” — to describe what the accounting firm’s practice had become with the merger.

“Corporations with international operations move their people around the world and need to do so efficiently — this requires the very best in tax and immigration support,” he said in a press release announcing the merger.

“Combining our market leading international executive tax services with Greenberg Turner’s immigration practice makes KPMG a one-stop shop for global clients’ expatriate needs.”

Meanwhile, Ernst & Young has a long-standing immigration practice with Egan LLP and an alliance with tax law firm Couzin Taylor LLP.

It’s all a sign of accounting firms “making serious noise” about expanding their services, according to Furlong, who notes the recent moves mark the beginning of a full-scale entrance into the legal industry.

The accounting firms’ growing range of services to the same client base law firms are targeting should be a wake-up call to the legal industry, says Furlong.
“The main strategic difference I have seen between law firms and accounting firms is that law firms have always marginalized or restricted themselves in terms of the narrowness and the focus of their offer,” he says.

“Accounting firms don’t do that, and that’s why, in a lot of ways, this is not a fair fight. From a business perspective, legal services are just one part.”

Law firms can, if they choose, offer business services as well, he adds, noting even Deloitte’s acquisition of ATD is a lost opportunity for the legal industry.

For ATD, Deloitte’s interest is a validation of a practice that’s only at a nascent stage in Canada. While outsourcing document review or due-diligence tasks to overseas operations is common, there were few companies that did the work locally when ATD launched its practice on Soho Street in Toronto.

“It was a model that was seen worldwide but not in Canada before I started ATD. There are a few players but not anywhere near the scale we see it in the broader world,” says Shelby Austin, founder of ATD.

“People weren’t sure such a concept could work, that it could exist. Now a company like Deloitte has gotten involved in providing additional support to law firms and Canadian corporations. It certainly suggests that the idea itself is a good one for law firms and their clients as well.”

For Canadian clients who are still uneasy about having their files handled abroad, a local solution is a crucial aspect, says Dent.

“Of importance to many clients in Canada is that their data remains in Canada so their data doesn’t end up in the United States, it doesn’t end up in India, it doesn’t end up in some other jurisdiction,” he says.

It’s all about recognizing the various needs clients have, says Furlong.

“That’s exactly what law firms could have, should have been doing. But law firms, for the most part, don’t see themselves in those broad terms. They see themselves in one particular channel and that’s the law channel,” he adds.

 “And what Deloitte is saying, I think, is: ‘We are interested in providing [services] in all possible channels,’ and that is in law, accounting, and for all we know it includes IT.”

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