By Chris Hildreth, Managing Director, Marks Baughan
McDermott Will & Schulte, an Am Law firm with nearly 2,000 attorneys and close to $3 billion in revenue, is evaluating outside investment, according to The Financial Times.
This news signals a sea change in the legal landscape. McDermott Will & Schulte is one of few Am Law firms that have acknowledged interest in taking on outside capital. Firm Chair Ira Coleman is regarded as highly entrepreneurial and innovative, elevating the significance of this development. If the evolution of private equity (PE) and the accounting sector is any guide, this news and other pending deal activity suggests that PE’s entry and expansion in law could be quite rapid.
If McDermott Will & Schulte does raise outside capital, we believe they’d employ a management services organization (MSO) structure to facilitate the investment. The MSO structure is proving to be the preferred vehicle for outside capital infusions into firms. Check out our webinars Law Firm Value Creation Part 1: Exploring Outside Investment and Law Firm Value Creation Part 2: Securing Outside Investment for in-depth explanations on the MSO structure and how it works.
Although McDermott Will & Schulte’s rationale was not disclosed, many law firms are exploring outside investment to pursue opportunities including:
Access to Growth Capital
Outside investors bring the financial resources needed to scale and grow. Firms can fund internal investments in marketing, technology, and new practice areas — or even seek acquisitions of smaller firms.
Ownership Liquidity
Traditionally, law partners’ equity has been illiquid — valuable on paper, but hard to monetize. The MSO structure changes that dynamic. Investment proceeds can provide liquidity to partners while also fueling growth.
Wealth Creation
In most transactions, partners retain some ownership in the MSO. This arrangement ensures alignment between the partners and the investor, and it also allows partners to share in the benefits from growth through strong returns on their MSO investment — which often exceed 3–4x the initial value.
Tax Advantages
Funds distributed through an MSO transaction are typically taxed at capital gains rates rather than as ordinary income, resulting in significant tax savings.
Brand and Legacy Security
PE investors often see immense value in established law firm brands. Their capital helps extend those brands’ reach — allowing founders to secure their legacies while positioning the firm for sustained success.
The MSO structure has been employed in other regulated industries like medicine, dental, and accounting. It has withstood the test of time — and regulatory scrutiny. In law, that structure allows for both shared ownership and adherence to ABA rules. Nearly all our law firm deals are employing the MSO model.
If you’d like to learn more about outside investment and whether it might be right for your firm, please reach out to one of our law firm advisory leaders: Chris Hildreth (childreth@marbau.com) or John Martin (jmartin@marbau.com).
We also welcome you to watch our webinars linked above or read the content discussed in Part 1 here.