Key Points

• Private equity investment in U.S. law firms is accelerating via Management Services Organization (MSO) structures; ABA Model Rule 5.4 fee-sharing prohibition drives dual-entity architecture separating legal practice from business operations.
• Regulatory landscape is fragmented: Arizona, Utah, D.C. and Puerto Rico permit non-lawyer ownership or investment; California, Illinois, and Colorado advancing restrictions on PE involvement in law firms (2025–2026).
• MSO model proven across healthcare, dental and accounting sectors now adapted for legal services; key structural issues include Rule 5.4 compliance, absence of attorney noncompetes, key-person risk and jurisdiction-by-jurisdiction regulatory variance. 
• Fox Rothschild expands its existing M&A services by offering buyside and sellside representation through its Law Firm Transactions & MSO Advisory.

The Rise of Private Capital in Legal Services

The legal services industry is entering a structural shift driven by increased participation of private capital. Private equity firms, family offices, private credit funds and growth equity investors are actively deploying capital into law-adjacent structures, and the pace is accelerating.

According to IBISWorld, the U.S. legal market generates approximately $400 billion in annual revenue, yet it remains one of the last major professional services sectors largely untouched by institutional investment. That is changing rapidly. While early PE deal activity in the legal sector focused on smaller consumer-facing law firms and AI-focused legal technology startups, the conversation has now reached the highest levels of BigLaw.

In November 2025, McDermott Will & Emery confirmed it was exploring restructuring to sell a stake to private equity investors. The following month, Quinn Emanuel’s founder John Quinn publicly stated he was “open” to outside investors. In May 2026, LA-based deals boutique Massumi + Consoli sold a back-office stake to Trive Capital, and Morgan & Morgan, America’s largest personal injury firm, acknowledged it was exploring outside capital and retained JPMorgan to advise on the process.

This trend mirrors what has already occurred in accounting, where one-third of the top 300 accounting firms in the United States are now PE-backed.

Special Considerations for Law Firm Acquisitions

Ownership Restrictions
In almost all U.S. jurisdictions, it remains prohibited for non-lawyers, including PE firms, to directly own law firms. Rule 5.4 of the ABA Model Rules of Professional Conduct prohibits fee-sharing between lawyers and non-lawyers, creating a fundamental structural barrier to conventional acquisition models.

The regulatory landscape is both complex and in flux. Arizona’s Alternative Business Structure (ABS) framework now permits non-lawyer ownership. The District of Columbia has allowed it since 1991 (although not passive investments by non-lawyers). Utah operates a legal regulatory sandbox that permits non-lawyers to own, invest in and share fees with law firms. Puerto Rico approved a new rule effective January 1, 2026 that allows non-lawyers to hold up to a 49% equity stake in law firms.

However, other jurisdictions are moving in the opposite direction. In April and May 2026, California, Illinois and Colorado each advanced legislation to restrict or regulate PE investment in law firms. California Assembly Bill 2305, approved with a bipartisan 68-0 vote on April 6, 2026, specifically aims to “close the loopholes” that have enabled indirect non-lawyer control. Investors and law firms must navigate this patchwork jurisdiction by jurisdiction.

The United Kingdom offers a preview of what deregulation can produce. Under the Legal Services Act 2007, the UK opened its doors to non-lawyer ownership of law firms. Within a decade, private capital poured into the British legal market and consolidation accelerated dramatically. While the U.S. regulatory environment remains more restrictive, the direction of travel is unmistakable.

Talent Retention and Attraction
Unlike in accounting or medicine, attorneys generally cannot be bound by noncompete agreements. This creates unique challenges for investor-backed platforms, as rainmakers may depart freely following a transaction, potentially undermining the investment thesis.

Well-designed MSO structures can help address this challenge by enabling firms to offer true equity participation in the management company. Key executives, including CFOs, COOs and marketing directors, can hold equity in the MSO, creating retention “glue” that aligns long-term incentives across the platform.

Cultural and Governance Concerns
Concerns about the potential conflict between PE priorities (short-term returns, cost optimization) and client interests (quality of service, attorney independence) remain central to the debate. Loss of autonomy and the preservation of professional culture require careful attention in any transaction structure.

The Established MSO Model in Professional Services

The Management Services Organization (MSO) structure is not new. It has been deployed successfully for nearly two decades across healthcare, dental care, veterinary care and accounting — wherever professional licensing rules prevent direct corporate ownership of practices.

The core principle is consistent across all sectors: the MSO handles non-clinical or non-professional functions, such as human resources, information technology, accounting, billing, marketing, compliance and operational management, while licensed professionals retain exclusive authority over all professional judgment and client-facing decisions.

Healthcare
The healthcare sector pioneered the MSO model in the 1990s as rising administrative complexity, insurance reimbursement, regulatory compliance, technology infrastructure and workforce management drove experimentation with centralized non-clinical management across multi-location practices. Physician-owned entities retained full clinical authority while MSOs assumed responsibility for billing, revenue-cycle operations, marketing, procurement and facilities. Private equity accelerated adoption from 2015 onward. According to Market Research Future (MRFR), the U.S. healthcare MSO market was valued at approximately $20.89 billion in 2024 and is projected to reach approximately $53.12 billion by 2035, reflecting a compound annual growth rate of roughly 8.85%. According to the American Medical Association, as of 2024, only 42.2% of physicians remained in wholly physician-owned private practice — down from 60.1% in 2012. The healthcare experience established the foundational principle underlying every subsequent MSO deployment: professional enterprises can achieve institutional scale and attract outside capital without compromising practitioner independence.

Dental
Dental Services Organizations (DSOs) emerged in the late 1990s and early 2000s. By the 2010s, DSOs became one of the fastest-growing segments of dental care in the United States. The U.S. DSO sector reached approximately $26.9 billion in 2023, with a projected compound annual growth rate of approximately 16.4% through 2030. Major platforms include Heartland Dental, The Aspen Group, Pacific Dental Services, Smile Brands, and Dental Care Alliance. According to the American Dental Association, approximately 16 percent of U.S. dentistry is currently consolidated through DSO structures.

Accounting
In August 2021, TowerBrook Capital Partners made a significant investment in EisnerAmper, marking the first PE investment in a top 20 accounting firm. Since then, EisnerAmper has completed more than a dozen acquisitions. Citrin Cooperman, backed by Blackstone, has completed more than 25 acquisitions since 2022, reaching a valuation of approximately $2 billion. Baker Tilly’s 2024 investment from Hellman & Friedman and Valeas Capital Partners led to a $7 billion merger with Moss Adams in 2025, creating the sixth-largest U.S. accounting firm. PE now holds a stake in roughly one-third of the 30 largest U.S. accounting firms.

Adapting MSO Structures for Law Firms

The MSO model that originated in healthcare is now being adapted for law. The fundamental architecture is the same: a dual-entity structure in which the MSO handles business operations (finance, HR, marketing, IT, client intake, vendor management) while the professional entity — the law firm — retains all professional judgment, client relationships, and ethical obligations.

What investors are acquiring is the non-legal infrastructure: the technology stack, CRM systems, call centers, data analytics capabilities, brand assets, the talent platform and recurring service revenue through the management services agreement (MSA).

The MSA must confirm that the law firm remains 100% lawyer-owned, limit the MSO strictly to non-licensed activities, ensure compensation structures avoid prohibited fee-sharing, and use fixed-fee or cost-plus arrangements rather than percentage-of-revenue models that could implicate Rule 5.4.

Key Differences from Other Professional Services

Fee-Sharing Restrictions: Rule 5.4 requires that MSO compensation be structured as fixed fees or cost-plus arrangements rather than as a percentage of law firm revenue. This is more restrictive than analogous rules in most healthcare contexts.

No Noncompetes: Unlike physicians or dentists, attorneys generally cannot be bound by noncompete agreements, requiring creative incentive alignment to retain talent post-acquisition.

Evolving and Fragmented Regulation: The regulatory landscape is jurisdiction-by-jurisdiction and actively evolving, with some states moving toward openness (Arizona, Utah, DC), others toward restriction (California, Illinois, Colorado).

Concentrated Key-Person Risk: Law firms frequently have revenue concentration around a small number of rainmakers, creating heightened key-person risk that must be addressed structurally. The first MSO transaction in a platform strategy establishes the template for all subsequent acquisitions. Design decisions made between LOI and closing determine scalability, making experienced counsel critical from the earliest stages of the process.'

How Fox Can Help: Introducing Law Firm Transactions & MSO Advisory

Fox Rothschild guides law firm partnerships, PE sponsors, venture capital funds, and technology-enabled service companies through the complex intersection of legal ethics, state-level ownership restrictions, and innovative business structures. We combine deep familiarity with legal-industry economics, nationwide MSO experience in healthcare, and hands-on execution capability across complex transactions involving mergers, acquisitions, governance, ethics, and professional responsibility.

We provide:

• MSO Formation and Structural Design: Dual-entity structures satisfying regulatory requirements while maximizing operational efficiency.
• Regulatory and Ethics Advice: Jurisdiction-by-jurisdiction analysis of ownership rules, fee-sharing restrictions, and permissible structures.
• Investment and Growth Transactions: Platform acquisitions, add-ons, minority investments, and recapitalizations.
• Governance and Incentive Alignment: Equity structures and retention mechanisms tailored to legal services constraints.
• Multidisciplinary Counsel: Integrated capabilities spanning M&A, tax, regulatory, employment, and professional responsibility.

The convergence of private capital and legal services is happening now. Successfully navigating this landscape requires counsel who understands both sides: the investment objectives of PE sponsors and the ethical obligations, cultural dynamics, and regulatory constraints of law firm partnerships.

Fox Rothschild stands ready to assist PE sponsors entering the legal services space and law firms evaluating strategic options, from structuring platform investments to negotiating MSO agreements and advising partnerships on the implications of outside capital.

To learn more about our capabilities and experience advising on law firm transactions and MSO structures, click here.

For more information, visit the Law Firm Transactions & MSO Advisory page or contact Arina Shulga at 212.450.9846 or ashulga@foxrothschild.com.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the authors and not necessarily this law firm or its clients.