Alternative Legal Services Sector is Exploding
In the coming years, your biggest competitor may well be an accounting firm, not the lawyer down the street.
And that threat just got bigger, in the wake of Ernst & Young’s multi-million acquisition of a leading Alternative Legal Services Provider (ALSP).
EY — the entity that includes Ernst & Young accounting companies worldwide – announced in April that it will buy the Pangea3 Legal Managed Service from Thomson Reuters. The $35-40 million purchase comes on the heels of EY’s 2018 purchase of another large ALSP – the UK-based Riverview Law.
The move “will make EY one of the leading professional services organizations for global legal advisory services and legal operations services,” according to this EY press release.
Tech guru Bob Ambrogi says the acquisition is a wake-up call for lawyers.
“ [E]very firm, no matter how savvy, needs to realize that their greatest competitors going forward are not other law firms, they are ALSPs such as EY,” he writes on this LawSites blogpost. “And with this deal, EY is that much better positioned to compete.”
Explosive Growth of ALSPs
This 2017 ABA Journal article explains how legal managed services providers create and staff “process-driven systems to complete legal work efficiently and at lower cost.”
Pangea3, which was launched in 2004, employs more than 1,000 legal professionals across eight service delivery locations on three continents. It specializes in document review and analysis, contract management, corporate-compliance services and financial-trade documentation. Last year, its revenues were reported to be around $700 million.
The ALSP market has exploded in recent years. Not long ago, “the sector was still nascent and poorly defined,” says Ambrogi. But global revenues skyrocketed from $8.4 billion in 2015 to $10.7 billion in 2017.
“Is this a big deal?” asks The Artificial Lawyer. “Er … yep! Huge deal. With this much added firepower – plus the clients that [Pangea] already has, EY can do a lot more than before. Plus, when plugged into EY’s massive client base, who knows what they can do.”
Big Four are Big ALSP Players
A sizable slice of the ALSP piece is owned by Ernst & Young and the other Big Four accounting firms, and that slice is getting bigger.
“Among the largest and fastest growing ALSPs are the Big Four accounting firms – Deloitte, EY, KPMG, and PwC,” according to Thomson Reuters. “The Big Four’s legal service offerings compete more directly with law firms than those of other ALSPs. About 23 percent of large law firms say that they competed for and lost business to the Big Four within the past year.”
ALSP Support for Law Teams
From the EY press release: “By leveraging legal, technical and business-process talent in quality, cost-effective centers, Pangea3 helps clients mitigate legal risks, reduce burdensome costs and provide continuity and scale to budget-strapped legal teams.”
“The acquisition will greatly enhance EY technology-enabled legal managed services in the three core areas of contract lifecycle management, regulatory risk and compliance, and investigations and litigation. In addition, EY Law practices, comprising more than 2,400 lawyers in 84 countries, will continue to rapidly grow their Legal Advisory services.”
EY Global Chairman and CEO Mark Weinberger says the move is only the beginning:
“This new enhanced offering will make EY one of the leading professional services organizations for global legal advisory services and legal operations services, including legal function advisory, managed services and technology. The acquisition is an example of how EY is working to provide clients with holistic solutions, which are enabled by technology.”
The acquisition is expected to primarily impact big law firms. But with EY pledging to continue the “evolution” of legal managed services, who knows what the future holds for firms of all sizes.
