management service organizations
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the management service organization (mso) model represents legal profession regulatory arbitrage at its finest. by splitting law firms into two separate legal entities, msos enable non-lawyer investment while maintaining technical compliance with professional conduct rules1 in restrictive jurisdictions.
core framework: the two-entity structure
the mso model creates two separate legal entities working in tandem:
Two-entity structure separating professional services from business operations to enable non-lawyer investment
professional entity (pe)
- ownership: lawyers only
- function: provides legal services to clients
- control: maintains professional judgment and client relationships
- assets: typically owns minimal assets, focuses on legal practice
management service organization (mso)
- ownership: non-lawyers, including private equity and other investors
- function: owns substantially all firm assets and provides support services
- revenue: extracts profits through management fees paid by the pe
- services: technology, hr, finance, marketing, facilities, strategic planning
transaction structure
holland & knight, among the first firms advising on mso transactions, describes the standard approach:
“at the closing, the mso acquires substantially all of a law firm’s assets (but specifically excluding any assets that must be owned by a law firm, such as client records, engagement letters and offer letters, or employment agreements with lawyers to provide professional services) and enters into the msa, as well as related agreements.”
asset separation
mso acquires:
- technology infrastructure and software
- office leases and equipment
- marketing materials and client lists
- furniture, fixtures, and equipment
- intellectual property (where permissible)
pe retains:
- client records and confidential information
- engagement letters and client contracts
- employment agreements with lawyers
- professional licenses and regulatory relationships
management services agreement (msa)
the msa governs the relationship between entities and must carefully balance:
- professional independence: pe maintains control over legal judgment
- operational efficiency: mso provides comprehensive support services
- fee structure: compliance with ethics rules prohibiting revenue sharing
- governance: investor oversight without professional control
pioneering examples
burford capital: market first transaction
burford capital’s june 2020 investment in pcb litigation (uk)2 marked the first time a litigation funder took equity in a law firm.
transaction details:
- stake: 32\% minority equity position2
- structure: uk’s alternative business structure (abs) regulations enabled direct investment2
- rationale: “immediate infusion of capital that isn’t tied to case outcomes, specifically intended for firms to invest in growth”2
business model evolution:
- april 2021: pcb litigation merged with byrne and partners to form pcb byrne
- burford maintained: minority equity stake in combined firm
- strategic expansion: burford now in talks with “several us law firms about buying minority stakes”
jonathan molot, burford co-founder, captures the market opportunity:
“it’s a crazy thing that the capital markets and the market for legal services have had no interaction historically, when law has grown up to be a multitrillion-dollar industry”
alvarez & marsal: broadfield law firm
a&m’s july 2024 launch of broadfield3 demonstrates the mso model’s us application.
structure:
- entity: broadfield operates as law firm3
- support: a&m legal services (amls) provides management services via mso structure3
- services: technology, back-office operations, strategic growth advisory, capital procurement assistance3
geographic scope: planned expansion across uk, us, and continental europe with localized governance structures
governance model:
“all broadfield firms will retain their own governance – in accordance with their jurisdiction – and p&l, to best manage their business with respect to local market conditions”
alpinex portfolio approach
alpine investors (san francisco pe firm) uses the mso model for “exposure to a portfolio of law firms in the us and canada,” though specific structural details remain private.
personal injury firms: the new frontier (november 2025)
personal injury law firms emerged as the leading edge of mso-enabled private equity investment in late 2025, following texas ethics opinion 706’s blessing of the structure5.
why pi firms attract private equity
predictable cash flows: high turnover of cases, most settling quickly, provides more stable revenue than contingency-dependent litigation practices
recession resistance: “people are always going to drive… there are always going to be accidents” - andy halaby, rafi law group5
fragmented market: thousands of regional firms create consolidation opportunities for roll-up strategies
operational leverage: marketing, technology, and back-office functions benefit from economies of scale
succession crisis: nearly 40% of law firm partners expect to retire within a decade; pi firm owners seeking exit options
firms actively pursuing pe investment
dudley debosier (louisiana)5:
- 16-year-old firm with $1.2bn+ recovered for injury victims
- hired kbw stifel to seek private equity backer
- aims to become “platform for acquiring other firms”
- founder chad dudley also runs marketing agency and consultancy for pi attorneys
- stated strategy: “bigger players are going to be going into different geographies”
rafi law group (arizona)5:
- hired kbw stifel to seek pe investment
- expanding from arizona into colorado, new mexico, texas
- chief legal officer andy halaby: nearly 30 years’ experience in law of lawyering
- focus on operational efficiency and geographic expansion
the dominguez firm (los angeles)5:
- founded 1987 by juan dominguez
- staff of 120+ professionals; $1bn+ recovered
- hired capstone partners to solicit pe interest
- 96% success rate on litigated cases
mike morse law firm (michigan)5:
- michigan’s largest pi firm
- 200+ legal professionals; $2bn+ recovered
- exploring pe options
the mso structure in action
these pi firms propose using the standard mso two-entity structure:
- mso entity (pe-backed): acquires non-legal assets - technology, marketing, real estate, non-lawyer staff
- law firm entity (lawyer-owned): maintains professional practice, client relationships, legal judgment
- management services agreement: mso provides support services for fees (compliant with opinion 706 - flat or cost-plus, not percentage-based)
market dynamics
consolidation thesis: well-capitalized regional firms can acquire smaller practices nationwide, leveraging:
- shared technology platforms
- centralized marketing operations
- operational expertise and best practices
- capital for growth and acquisition
industry observers predict this represents a “tipping point” - once institutional capital enters the market, competitive dynamics will force traditional firms to adapt or consolidate5.
biglaw breakthrough (november 2025)
november 2025 marked a watershed moment: the first am law 50 firm publicly acknowledged considering private equity investment through an mso structure. this development signals potential mainstream adoption of mso models in large law firms.
mcdermott will & schulte: $2.8b firm explores mso structure
firm background:
- formed august 1, 2025 from merger of mcdermott will & emery and schulte roth & zabel
- nearly 1,750 attorneys across 20+ offices worldwide
- combined revenue exceeding $2.8 billion
- ranks among top 20 law firms globally
pe exploration announcement (november 12, 2025): chairman ira coleman acknowledged the firm is “fielding inbound interest” from outside investors, though emphasized discussions are “very preliminary.”
proposed structure: the firm is considering splitting into two parts:
- lawyer-owned practice: fully owned by lawyers, handling all client advisory work
- mso entity: separate entity providing administrative services (billing, hr, payroll, business management, office leases, it infrastructure)
private equity investors could buy stakes in the mso, generating returns from the revenues paid to it by the lawyer-owned firm for these services.
significance: if employed by mcdermott—a top-20 global firm—this structure “could set a template for other large us or international firms” seeking pe investment while navigating non-lawyer ownership prohibitions.
cohen & gresser: convertible note approach
firm background:
- international law firm founded 2002
- approximately 80 lawyers across five offices (new york, paris, washington d.c., london, dubai)
- represented high-profile clients including sam bankman-fried and ghislaine maxwell
pe discussions (november 24, 2025): the firm confirmed conversations with outside investors regarding a $40 million (£30.5 million) convertible note that would ultimately convert to equity.
leadership perspective: global managing partner lawrence gresser: “we have been preparing our firm for the entry of modern finance into the legal sector for over a decade.”
timeline: if a deal is struck, it could be completed as early as q1 2026.
market momentum: “everything exploded”
holland & knight, the leading mso advisory practice, describes unprecedented activity:
trisha rich (partner leading mso practice): “everything exploded” in calendar year 2025 after years of quiet activity.
transaction experience:
- advised on “more than a dozen” law firm mso deals
- describes legal msos as “next billion-dollar industry”
- quote: “it’s an opportunity to change the way law is practiced” - msos could “drag law firms out of the stone age”
market assessment: adil taha (co-founder, taha & watmough advisory): “i know of several top 60 us law firms currently in the middle of setting up msos that will be finalized next year [2026]. mcdermott going down that route could open the floodgates to other top us firms doing the same.”
regulatory context
texas blessing: texas ethics opinion 706 (february 2025) provided crucial guidance that msos with flat-fee (not percentage-based) arrangements comply with professional conduct rules, enabling this wave of activity.
california restriction: california ab 931 (october 2025) imposed four-year freeze on abs fee-sharing but explicitly preserved mso pathway with proper structuring.
private equity legal alliance: first-of-its-kind consortium launched november 2025 to help law firm founders and investors navigate mso structures, signaling institutional support for this approach.
strategic implications
the biglaw breakthrough transforms mso perception from “small firm workaround” to “sophisticated capital structure” acceptable to elite firms. key drivers:
succession planning: aging baby boomer partners (60% of law firm partners, 38% retiring within decade) need liquidity mechanisms
technology investment: ai implementation requires capital that traditional partnerships struggle to provide
competitive pressure: once one major firm adopts mso structure, competitive dynamics may force peers to follow
investor interest: holland & knight reports “considerable interest in deploying capital in the legal profession” from institutional investors seeking exposure to legal services market
operational requirements
successful mso arrangements require careful attention to:
professional independence maintenance
- lawyers retain exclusive control over professional judgment
- client relationship decisions remain with pe
- professional conduct compliance overseen by lawyers
- ethics and professional responsibility maintained by pe
service delivery framework
mso typically provides:
- finance and accounting
- human resources and payroll
- document management systems
- conflict checking infrastructure
- technology platforms and it support
- strategic growth advisory
- marketing and business development
fee structure compliance
critical compliance issue: management fees cannot be percentage-based revenue sharing4 (see texas ethics opinion 706 for detailed analysis).
permitted fee structures:
- flat monthly fees
- cost-plus arrangements
- fair market value pricing
- other non-revenue-tied methods
regulatory landscape
permissive frameworks
- united kingdom: abs regulations enable direct investment (burford/pcb model)
- jurisdictions allowing msos: varies by state interpretation of professional conduct rules
restrictive environments
most us states require careful structuring to avoid model rule 5.4 violations:
- texas: first state guidance via ethics opinion 706 (february 2025)4
- california: proposed legislation to prevent fee sharing with nonlawyer-owned entities
- federal considerations: doj/cfius oversight for foreign investment
cross-industry precedents
the legal mso model draws from established healthcare precedents:
healthcare mso market
- market scale: extensive private equity deployment through mso structures
- regulatory driver: corporate practice of medicine (cpom) laws prohibit non-physician ownership
- examples: oneoncology, careaccess mso, medvanta
market penetration: “more than one-third of the largest us accountancy groups were sold to private equity in the space of three years”
strategic drivers
law firm motivations
capital access: funding for ai, technology, and infrastructure without diluting lawyer control operational efficiency: professional management and economies of scale
business model flexibility: ability to move beyond hourly billing constraints valuation establishment: first-time firm valuation for succession planning
investor attractions
market opportunity: access to multitrillion-dollar legal services market fragmented industry: thousands of small firms create consolidation opportunities regulatory moat: complex compliance requirements limit competition recurring revenue: ongoing management fee streams
implementation challenges
compliance complexity
- varying state interpretations of professional conduct rules
- ongoing regulatory guidance development (texas leading with opinion 706)
- professional liability insurance considerations
- tax treatment complexity
operational tensions
balancing investor returns with professional independence requires careful governance structures and ongoing compliance monitoring.
market acceptance
traditional legal market culture often resistant to business model innovation and outside investment.
future outlook
market indicators suggest continued mso development:
- holland & knight: “already closed multiple private equity investments into msos that support law firms”
- market assessment: “considerable interest in deploying capital in the legal profession”
- technology driver: ai implementation requires capital that traditional partnerships cannot easily provide
the mso model represents a sophisticated regulatory workaround that enables capital formation while maintaining professional conduct compliance. as regulatory guidance develops and market acceptance grows, msos may become increasingly common in us legal practice.
references
[1] Model Rule 5.4: Professional Independence of a Lawyer. American Bar Association
[4] Opinion 706. Texas Center for Legal Ethics, February 2025