The turf war between lawyers and multidisciplinary auditing firms continued last year, but lawyers seem to be winning back areas they have traditionally advised on, such as tax.
Legal firms continue to show that they have adopted a much more competitive approach. They have increased their marketing activities and are buying in more diverse skills, such as tax and corporate finance specialists.
They have been helped by tighter corporate governance legislation in the US, through the Sarbanes-Oxley Act, which has restricted the functions auditors can perform.
"Clients are wary of the increasing risk of sourcing legal and accounting services from the same firm," says Werksmans chairman Carl Stein.
Deneys Reitz chairman Michael Hart says the notion of worldwide composite law and auditing firms is over.
But over the past few years, legal advisers - many of whom are not admitted attorneys and who operate in-house in large companies and financial institutions - have encroached on attorneys' areas of expertise.
Changes to the regulation of the profession, with the long-overdue draft Legal Practice Bill out for comment, could give advisers more scope for legal work.
The sacred preserve of admitted attorneys - court appearances - may be opened up. The bill proposes that legal practitioners who do not render services to the public at large, such as lawyers employed by corporations, should also be granted the right of audience in the courts. Financial institutions could then appoint their own conveyancers. At present, conveyancing makes up a large part of legal firms' business.
The big legal firms have shown they are still the advisers of choice on large transactions, however. Webber Wentzel Bowens came top of the list in terms of the size of deals advised on last year - 31 transactions, worth R37bn, according to Ernst & Young. Next was Cliffe Dekker Attorneys (31 transactions, worth R29bn); Deneys Reitz (10 juicy transactions, worth R28bn); Bowman Gilfillan (14, R26bn) and Werksmans (36, R26bn). Edward Nathan & Friedland, an advisory firm, provided legal advice on the biggest volume of transactions last year: 41, valued at R22bn.
Because black economic empowerment drove deal flow last year, those firms with strong connections to the black elite advised on some of the largest empowerment deals. Bowman's advisory role on four of the top empowerment deals, especially in the Harmony/ARMI/Avmin tie-up and the Harmony and ARMgold merger, was probably helped by its links to ARMgold chairman Patrice Motsepe, who served articles at the firm early in his career.
Some firms have chosen to represent black empowerment partners in deals, rather than the traditionally white-owned top companies. Bell Dewar & Hall, for example, was not listed as an adviser to Sasol and Anglo Platinum in 2003, though it advised them in 2002.
"We have to limit ourselves in certain industries or conflict of interest develops," says the firm's managing partner, Andrew Mitchell. "We chose, for instance, to represent the Royal Bafokeng in the deal with AngloPlat."
Bowman chairman Jonathan Schlosberg says the sophistication of empowerment deals has meant that lawyers are involved from early on in the process. "Lawyers are therefore venturing beyond the pure principles of law to the structuring of transactions," he says.
There are a few new names on Top Companies' list of legal advisers, mainly as a result of Telkom's inclusion in the SA Giants. But it is interesting to note that despite the increased involvement of black firms in large corporate deals, many failed to become the big companies' major legal firm.
"The huge corporates need advice on a wide range of issues, which smaller black firms are not yet able to offer," says Moss Morris chairman Oshy Tugendhaft.
Werksmans' Stein says the revolution of empowerment will not take place in the giant transactions, but in small and medium-sized businesses.
As procurement becomes a more important part of empowerment deals, legal firms will have to get more black partners quickly.
"By far the biggest issue facing the profession in the coming few years is empowerment," says Stein. "It will eclipse almost everything else."
But firms working at improving their employment equity credentials are constrained by the fact that there is a serious scarcity of black attorneys at senior level.
Schlosberg says there are enough black graduates in the pipeline, but it takes about seven years for them to reach partner level.
Individual firms have been tackling the transformation issue in their own way. There has not yet been a co-ordinated approach across the profession.
