Fortress Investment Group’s acquisition of a minority stake in Arizona-based personal injury law firm Rafi Law Group in May was further proof that few professions are beyond private equity’s reach.
From dental clinics to accounting firms, PE has swept the professional services landscape and law firms appear to be its latest target.
Just last month, it was reported that Morgan & Morgan, the largest personal injury firm in the US, was considering selling a stake to an outside investor. Multiple consumer-facing law firms have also been approached by PE investors, according to 9fin sources.
“The law firm space is already seeing a lot of M&A and PE is moving into professional spaces,” a lawyer said. “Law firms are just the natural next step for them.”
There is a caveat though — PE cannot technically own a law firm.
Ethics rules, particularly those mandated by the American Bar Association’s Rule 5.4, broadly prohibit non-lawyers from owning law firms or sharing legal fees in the US. But that hasn’t stopped investors from finding creative ways to inject capital into legal practices. This is currently taking place in two forms:
- Managed Service Organizations (MSOs): The law firm firm is split...
