Law Firms
McDermott acknowledges ‘fielding inbound interest’ from outside investors as it listens to new ideas
McDermott Will & Schulte said it is “fielding inbound interest” from outside investors after the Financial Times reported that the law firm is considering splitting off its back-office work into a managed service organization in which private equity could own a stake. (Image from Shutterstock)
McDermott Will & Schulte said it is “fielding inbound interest” from outside investors after the Financial Times reported that the law firm is considering splitting off its back-office work into a managed service organization in which private equity could own a stake.
McDermott chairman Ira Coleman told Law360, Law.com and Bloomberg Law (here and here) that it has been approached, although “this is all very preliminary.”
“As one of the fastest-growing, most successful modern law firms, we are constantly approached and we always listen to new ideas,” Coleman said. “This is how we find the best opportunities to attract and retain the industry’s top talent and what our clients expect from us.”
Splitting off back-office operations, such as billing, marketing, information technology and human resources would avoid issues created by ethics rules that ban fee sharing and nonlawyer ownership of firms, Law360 explains. The model is already in use by medical practices and accounting companies, according to the Financial Times and Law.com.
Litigation funder Burford Capital has invested in U.K. firms with similar structures, according to Law360. Burford chief development officer Travis Lenkner said other firms are also considering the idea.
“From our conversations with leading global firms, it’s clear that larger, more sophisticated firms are actively exploring how to use MSOs to secure long-term competitiveness,” Lenkner told Law360.
Private equity company Renovus recently announced that it has acquired three organizations that provide back-office services to the legal sector, Bloomberg Law reports. The three organizations will be combined into one company that will have outsourcing contracts with a majority of the nation’s 200 top-grossing firms, according to Renovus managing director Lee Minkoff.
“All major law firms are having these conversations,” Minkoff said. “They’re not saying we should do it, they’re saying, well, we need to learn what it means and what it looks like and what others are doing.”
But legal sector analyst Jordan Furlong warned that lawyers have to be aware of the implications.
“This is not getting another line of credit from your bank,” Furlong told Bloomberg Law. “You are severing a significant chunk of your law firm and handing it over to a third party. That is not a decision I would take lightly if I were running a law firm.”
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