The Private Equity Law Firm Play
Ben Thomson, LawFuel contributor
Private equity is circling the legal sector, a new breed of law firm is exploring ways to monetise its most valuable asset: equity in the partnership.
Both Cohen & Gresser, a litigation boutique, and global player McDermott Will & Emery have reportedly been in discussions about bringing in outside capital — a move that would have been unthinkable a decade ago.
As the Financial Times reports the drive for liquidity is being fuelled by enormous latent value in US legal partnerships, many of which now operate as billion-dollar enterprises.
Kirkland & Ellis, now America’s largest law firm, generated nearly $9 billion in revenue last year, with profits per equity partner exceeding $9 million – up from $3.5 million a decade ago. Meanwhile, McDermott Will & Emery reportedly pulls in around $3 billion annually.
Traditionally, US law firms restrict ownership to practising partners. But as with other professional services sectors — from accounting to healthcare — private equity is finding creative ways in. Structures such as management service organisations (MSOs) allow firms to offload back-office operations, with PE firms investing in the MSO entity and charging service fees to the law firm itself. LawFuel recently explored this workaround and others in its coverage of private capital’s legal incursion.
Another model involves leveraged capital injections. As reported, Cohen & Gresser is considering issuing a $40 million convertible bond — a debt instrument that may later convert to equity, depending on regulatory shifts. Under current rules, law firms are permitted to take on external debt but not outside equity ownership — though that’s slowly changing in select jurisdictions.
One such jurisdiction is Arizona, the first US state to permit Alternative Business Structures (ABS). These allow non-lawyer ownership and private equity funding of legal service firms. The global accounting giant KPMG has already taken advantage of this framework to launch a legal arm in the state (Reuters).
But private capital’s entrance into Big Law is not just about enriching legacy partners. The cash also funds technology upgrades, including AI-driven platforms, and recruitment bonuses to poach high-performing laterals in an increasingly competitive market.
As we have reported with biglaw investing heavily in AI tools firms are under pressure to invest in legal tech to remain competitive and efficient.
For lawyers benchmarking themselves against Wall Street bankers, equity access — not deferred retirement wealth — is now the metric that matters. The traditional model of the law firm as a bastion of collegial restraint is giving way to one where capital, liquidity, and competitive edge drive strategic decisions.
As LawFuel noted in its deep dive on private equity’s influence, the firm of the future may look less like a partnership and more like an asset-managed business unit — leaner, better capitalised, and designed for liquidity.
