Page 60 - The Handbook - Legal and Accounting Networks 81
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Law and Accounting Networks and Associations
There are structural differences between referrals in the legal and accounting professions. While the market
for legal services is many times greater than the market for accounting, audit, and tax services, there are no
dominant firms — no Big 4 — in the legal profession.257 There are approximately 25 firms having more than
1,000 attorneys based primarily in New York, London, Chicago, San Francisco, and a number of other large
cities. None of the firms has any significant market share. However, the firms do have a brand name.
Large law firms in New York, London, Chicago, and a number of other cities account for a very small part of
the legal market. There were only 43,000 attorneys in Am Law 50 in 2006. The two largest networks had as
many attorneys.258 However, they represent a very large amount of the legal services market.259 Because the
average Am Law firm has only five branches, this means that they must refer to local firms. Network
membership is one criteria of quality that the firms use in referring this business.
Unlike the Big 4, however, law firm networks do not represent clients or become involved in the transactions.
Because the member firms are independent, there is no conflict of interest barrier to representation of
competitors. This allows the largest networks to have member firms that cumulatively represent virtually all
of the Fortune 500 companies.260 This means that all of the Fortune 500 corporate counsel are already familiar
with and are using members of the networks like Lex Mundi, TerraLex, WSG, etc. They may seek existing
counsel for recommendations and referrals.261 This means more referrals or networks members.
Accounting referrals are very different from referrals in legal networks. The accounting networks already have
adopted a common brand. The firms operate in a particular state or region. Few are national, so they do have
to refer business. They are neither international, nor are they opening branches outside of what they consider
their region. The network is the way they can demonstrate their international connections. They must use one
another in audits. Accounting networks are also more exclusive than law firm networks in that, in many cases,
the member firms have adopted either the name or a part of the name of the network. The referral fee payments
cement the relationships so they do not refer outside of their network.
However, there are other factors that may reduce the number of referrals among accounting firms. In the United
States, accounting and legal firms will not have the same number of referrals. Unlike attorneys, accountants
can practice in any state. Tax work is also federal; state taxes are relatively standard following some specific
patterns.
Given the concentration of the Big 4, which accounts for 94 percent of public companies followed by Grant
Thornton International and BDO International,262 a mid-size accounting firm’s typical client is a mid-size or
privately held company. Fortunately there are hundreds of thousands of mid-size companies that are now part
of the global economy. This has created a growing need for network membership. However, the rules on
auditing public companies are being reevaluated to require that auditing assignments rotate outside of the Big
4 to independent accounting firms.263
Operations – Other Network Initiatives.
257 Program on the Legal Profession, HARVARD LAW SCHOOL, www.law.harvard.edu/programs/plp/pages/statistics.php.
258 See infra Appendix 4.
259 HARVARD LAW SCHOOL, supra note 258.
260 Lex Mundi conducted a survey of members and found that they represented more than 90 percent of all Fortune 500 companies.
261 Unpublished Gallup 1992 and 1993 Survey conducted for Lex Mundi of 5,000 general counsel in 56 countries. The two primary ways for locating
outside counsel were recommendations from other outside counsel and from existing outside counsel.
262 FERF Survey: Audit Fees Down, Big 4 Still Dominate Public Company Filers, GOING CONCERN,
goingconcern.com/2010/06/ferf-survey-audit-fees-down-big-4-still-dominate-public-company-filers/.
263 See infra Chapter 6, Marketing the Network – Creating the Brand.
48
There are structural differences between referrals in the legal and accounting professions. While the market
for legal services is many times greater than the market for accounting, audit, and tax services, there are no
dominant firms — no Big 4 — in the legal profession.257 There are approximately 25 firms having more than
1,000 attorneys based primarily in New York, London, Chicago, San Francisco, and a number of other large
cities. None of the firms has any significant market share. However, the firms do have a brand name.
Large law firms in New York, London, Chicago, and a number of other cities account for a very small part of
the legal market. There were only 43,000 attorneys in Am Law 50 in 2006. The two largest networks had as
many attorneys.258 However, they represent a very large amount of the legal services market.259 Because the
average Am Law firm has only five branches, this means that they must refer to local firms. Network
membership is one criteria of quality that the firms use in referring this business.
Unlike the Big 4, however, law firm networks do not represent clients or become involved in the transactions.
Because the member firms are independent, there is no conflict of interest barrier to representation of
competitors. This allows the largest networks to have member firms that cumulatively represent virtually all
of the Fortune 500 companies.260 This means that all of the Fortune 500 corporate counsel are already familiar
with and are using members of the networks like Lex Mundi, TerraLex, WSG, etc. They may seek existing
counsel for recommendations and referrals.261 This means more referrals or networks members.
Accounting referrals are very different from referrals in legal networks. The accounting networks already have
adopted a common brand. The firms operate in a particular state or region. Few are national, so they do have
to refer business. They are neither international, nor are they opening branches outside of what they consider
their region. The network is the way they can demonstrate their international connections. They must use one
another in audits. Accounting networks are also more exclusive than law firm networks in that, in many cases,
the member firms have adopted either the name or a part of the name of the network. The referral fee payments
cement the relationships so they do not refer outside of their network.
However, there are other factors that may reduce the number of referrals among accounting firms. In the United
States, accounting and legal firms will not have the same number of referrals. Unlike attorneys, accountants
can practice in any state. Tax work is also federal; state taxes are relatively standard following some specific
patterns.
Given the concentration of the Big 4, which accounts for 94 percent of public companies followed by Grant
Thornton International and BDO International,262 a mid-size accounting firm’s typical client is a mid-size or
privately held company. Fortunately there are hundreds of thousands of mid-size companies that are now part
of the global economy. This has created a growing need for network membership. However, the rules on
auditing public companies are being reevaluated to require that auditing assignments rotate outside of the Big
4 to independent accounting firms.263
Operations – Other Network Initiatives.
257 Program on the Legal Profession, HARVARD LAW SCHOOL, www.law.harvard.edu/programs/plp/pages/statistics.php.
258 See infra Appendix 4.
259 HARVARD LAW SCHOOL, supra note 258.
260 Lex Mundi conducted a survey of members and found that they represented more than 90 percent of all Fortune 500 companies.
261 Unpublished Gallup 1992 and 1993 Survey conducted for Lex Mundi of 5,000 general counsel in 56 countries. The two primary ways for locating
outside counsel were recommendations from other outside counsel and from existing outside counsel.
262 FERF Survey: Audit Fees Down, Big 4 Still Dominate Public Company Filers, GOING CONCERN,
goingconcern.com/2010/06/ferf-survey-audit-fees-down-big-4-still-dominate-public-company-filers/.
263 See infra Chapter 6, Marketing the Network – Creating the Brand.
48
