KPMG's Legal Play Challenges Tradition with Firewalled Innovation

KPMG, a member of the Big Four accounting firms, has taken a significant step into the legal services market by launching KPMG Law US, a law firm in Arizona. This move is part of a broader strategy to provide legal services with a distinct value proposition, particularly in the post-transaction compliance and integration space. The firm’s approach is enabled by Arizona’s 2021 legal reform, which eliminated the traditional rule barring non-lawyers from owning law firms. This reform allows entities like KPMG to structure alternative business models that integrate legal services with their broader professional offerings [1].

According to reports, KPMG Law US is focusing on high-volume, commoditized legal work, such as post-merger integration, compliance harmonization, and system upgrades for legal departments. These services, while requiring a legal license, are often overlooked by traditional law firms that specialize in high-stakes, high-dollar transactions. KPMG aims to leverage its expertise in regulatory compliance and cost-effective service delivery to offer a more structured and predictable pricing model for these types of tasks [1].

To address concerns about the independence of legal services, KPMG has implemented strict operational and technological firewalls between its legal division and its broader business operations. For instance, KPMG Law US attorneys work in physically separated spaces within the firm’s Tempe, Arizona, office, with distinct entry and exit points. Additionally, the legal division operates on an isolated software stack to ensure no interference from non-legal departments [1].

While KPMG has publicly stated that it is not positioned to compete directly with traditional law firms, internal conversations among legal industry leaders suggest a more cautious perspective. Some managing partners of large law firms have expressed concerns, albeit off the record, about the potential disruption KPMG could bring to the legal services landscape. The firm’s ability to offer scalable, cost-efficient services in a niche that many traditional firms have deprioritized could pose a challenge to the prevailing billable hour model [1].

The long-term success of KPMG Law US will depend on its capacity to scale its services beyond Arizona. To date, the firm has relied on co-counsel arrangements to extend its reach into other states, mirroring the strategies used by national law firms. This approach allows KPMG to service clients across the country while adhering to state-specific legal ownership rules [1].

Industry observers are closely watching how KPMG’s model evolves and whether it can gain traction in a market that has long been dominated by traditional law firms. For now, the firm’s entry into the legal sector underscores the ongoing transformation of professional services, driven by regulatory flexibility and innovative business structures [1].

Source: [1] What's KPMG Up to With Its New Law Firm in Arizona? (https://news.bloomberglaw.com/us-law-week/whats-kpmg-up-to-with-its-new-law-firm-in-arizona)