AI Poses Private Capital Opportunity, Mayer Brown Chief Says

Outside investors circling law firms may help some shoulder the growing costs of artificial intelligence, according to Mayer Brown’s Jon Van Gorp.

“I could see private capital providing specific funding for AI with a use agreement between the firm and the AI vehicle where it’s tailored, just like litigation funding,” Van Gorp, the firm’s chairman, said on Bloomberg Law’s On The Merits podcast.

Still, the unique aspects of the legal services business pose challenges for broader outside investment in large firms, Van Gorp said. The “practice of law is still a profession, and lawyers still have their way of doing things,” he said.

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Van Gorp spoke to Bloomberg Law reporter Roy Strom about AI’s “big question that everybody’s talking about.” He also discussed his firm’s focus on servicing energy markets, the turbulent times for private credit markets, and the impact of President Donald Trump’s war on the legal industry.

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This transcript was produced by Bloomberg Law Automation.

Roy Strom:

Hello and welcome back to On the Merits, the news podcast from Bloomberg Law. I’m your host, Roy Strom.

Mayer Brown is one of the 30 largest law firms in the country. Founded in Chicago, it’s known for its finance practice. Jon Van Gorp has been the firm’s chair since 2021. He’s a structured finance lawyer who’s been called the godfather in mortgage-backed securities.

I spoke with Jon about Mayer Brown’s growth strategy, its surge in lateral partner hires, how he views law firm mergers, and the draw of expanding in Texas. We also touched on concerns of a downturn in the private credit market and the challenges facing investors who want to buy a piece of major law firms.

I started by asking Jon about how the firm’s 2025 financial performance will stack up.

Jon Van Gorp:

We’re going to stack up very well versus the industry. I can’t tell you specifically, but we’re going to have a very solid financial performance. On top of a solid performance previous to that.

Roy Strom:

What areas were the strongest performers last year?

Jon Van Gorp:

Interestingly, we’re an international firm, as I think you know. So for us, London was a real standout last year. Our London office did really well. That’s just an example. I could come up with other ones, but I wanted to highlight that because we’ve really been working on our offerings in London for a long time, getting the right people in the right places, going to market with the right brands, and that’s really starting to pay off for us. So London was a big standout in terms of performance last year.

Roy Strom:

Certainly a market that a lot of firms are competing for talent in, and I know every major law firm wants to win in the lateral market. Mayer Brown last year really stepped up its efforts on that front. I think you hired something like 56 laterals last year, which was maybe twice as many as the year prior. What was the strategic thinking behind that growth, and how did you execute it?

Jon Van Gorp:

That’s a question that’ll take me a little bit to unpack because there’s a lot to that, but we were very intentional about lateral hiring. We chose six areas to really focus on, and two of those I’ll mention that were keys in lateral growth and development were energy, which is a hot topic today with what’s going on in the Middle East, and infrastructure.

We see really strong market demand in both of those areas as power demands increase with data centers and everything else that’s going on in the world that needs to be plugged into something, and a migration from historical fossil fuels, which still power over 80% of the world, to alternative and renewable energy, not just for environmental reasons, but for national security reasons.

That’s an example of how we think, which is very product and industry focused. No client has ever asked me what practice area I sit in. Frankly, they haven’t asked me what office I sit in. They want to know what product and industry expertise I can deliver that gives them top of the market experience and expertise.

Roy Strom:

Of course, on top of lateral growth, another strategy that we’ve seen become more popular recently is law firm mergers. I know Mayer Brown’s history going back to 2002, the firm did a major transatlantic merger, but we’re sort of seeing another round of combinations. And I think one of the things that’s interesting to me about this particular time is that many of those mergers are involving New York firms. Just curious if any of those merger candidates drew your eye.

Jon Van Gorp:

You’re right. We did quite a bit of combinations, I’ll call them, about 15 years ago. And we’re optimizing that at the moment. So a big merger for us isn’t top of mind, but we’re always open to opportunity, of course, because growth in this industry is really important. You’ve got to continue to grow to succeed. And the investment in AI is just an example of that. As you spread that across more people, it makes the investment more efficient.

You think about living in a condominium complex. If there’s 20 owners that have to pay for the new boiler, that’s different than if there’s 200 owners who pay for the new boiler. So scale matters. How you get to that scale, in my view, as a leader, you’ve got to be open minded to opportunity.

Roy Strom:

Was Cadwalader a firm that you were involved in discussions with at all?

Jon Van Gorp:

Without commenting directly on that, I will say that there’s a lot of great lawyers at that firm. We have pretty strong brands in. What Cadwalader does, so that may have been more of an opportunity for Hogan, but I hope it works out for them because there are a lot of good lawyers at both firms. And by combining together, they can potentially put something together that’s pretty powerful for the market. So I wish them well.

Roy Strom:

I’ve heard you speak about the firm strategy. You talk about this funnel of practices that are attracting clients. I think I once heard you compare it to a pharmaceutical company expanding its patent portfolio. What practices do you have in development as you look out into the future? What’s going to be the next big blockbuster for Mayer Brown?

Jon Van Gorp:

Well, I already mentioned infrastructure and energy, so I won’t cover those again. Lending and private credit has been a strong brand for us. I think it can be stronger in line with our structured finance and fund finance brands. And so we’ve been working on that. Private credits had a bit of a turbulence over the past couple of weeks, but I think it’s here for the long term, just like structured finance was here for the long term, even though we had some dark days in 2008 and 2009.

So we’re still committed there and we’re making good headway. And many of our hires last year were into our lending and private credit area.

Insurance is an area that we’re focused on. The insurance market is going to double in the next decade. And half of that growth is going to be outside the United States. So it’s a perfect place for us to focus.

The other two areas I will mention is capital markets, which fits well with a lot of the other things that we’re doing and growing companies need to raise money. And then finally, white collar enforcement was the last one of these that we chose. And you might say, well, that’s an interesting choice right now. But we’ve seen there being good demand in terms of trade and national security issues, cybersecurity issues, which are strengths of the firm and building up our white collar and enforcement can help us there.

Roy Strom:

You mentioned private credit and this turbulent period that we’ve seen, at least in the past few weeks. I think a lot of the headlines around customers trying to withdraw amounts that are greater than the fund intends to give back. I know you have deep experience in the securitized asset market. And in particular, you were very busy during and after the 2008 crisis. I don’t think anybody’s looking at what’s happening in private credit like it’s 2008. But I’m curious if you see any parallels or if you can foresee what role lawyers will play in any drawn out period of stress for private credit.

Jon Van Gorp:

It’s a great question. And I’ll give you my perspective. It’s my personal opinion, not the firm opinion. It’s just me speaking from having almost 30 years of experience in this space.

What I call the great financial crisis spooked a lot of people because it was pretty broad and it created lots of distress. And so when anything becomes a little bit destabilized, people tend to think it’s going to be a repeat of that. I don’t see that here.

The expectations were that these loans would continue to perform at high levels and there wouldn’t be defaults. That’s not the way the loans are structured. They have an interest rate that reflects some level of default risk and some of the loans will eventually default. But the private credit guys are pretty smart and they put these structures in place in a way where they get paid back or they have good remedies if they don’t. And there’s businesses that they can own, they can liquidate. They’re not left with nothing. And so that’s maybe what we’ll see play out in some circumstances.

The defaults have been less than what I think people believe they are in that space. And there’s still a lot of confidence in the managers and the performance of their portfolio. But because automatically when anything happens, people go back to 2008 and 2009, they want to be protecting themselves from an event like that. So it’s understandable because history is something that informs our experiences going forward. I just don’t see that kind of collapse in this market.

There may be some defaults. There may be some workouts. There may not always be 100 percent realization, but all of that’s been factored into the business models. And I think the business models remain very much intact.

Roy Strom:

Another part of your background is a sort of connection to Dallas, the city. I know you went to SMU, continued to be active with the law school. And I think it’s a city where you began your law career. It’s also attracted more and more large law firms recently. I’m just curious if Dallas is a city that Mayer Brown should be in.

Jon Van Gorp:

Well, I have to add, it’s where I met my wife and where we got engaged. So there’s a lot of appeal to Dallas for me. But it’s not just me, right? It’s Texas generally in the U.S. economy and the world economy.

We’ve made some nice hires recently in Tokyo. We’ve expanded that office, almost doubled it this year, in fact. And those new hires were very focused on our capabilities in Texas because Japanese clients have U.S. operations that are more and more frequently in Texas. It’s not just energy, it’s manufacturing, it’s technology, it’s now financial services and its infrastructure. And it’s a diversifying, growing economy.

Some people even say that the Dallas Metroplex, Fort Worth, Dallas and the adjacent areas are going to be the third biggest metro area when the next census is released. And the way I see things growing there, I can understand it.

We’re now seeing Texas produce six million barrels of oil a day. It’s the energy sector plus. It’s the advantages that people see of doing business there. And it’s the reason law firms are growing their presence there. And we’re certainly trying to do the same.

Roy Strom:

I know I’m jumping around with you a lot here, but I wanted to ask about this ongoing discussion about outside capital trying to get into the law firm business. Burford Capital litigation funder, for instance, wants to do this with major firms. And there’s been very little headway to date. There’s real hurdles. One hurdle that I see is just more practical, which is why would partners want to give up this slice of the pie to somebody else? And I’m curious if you’ve thought about this, do you view it that way or do you think there is a case to make to partners that this could benefit a law firm?

Jon Van Gorp:

I represent sponsors of private capital, so I know the way they think. And it wouldn’t surprise me if this is an industry that they would like to invest in and to some degree disrupt, because there are things about law firms that are run in a way that is probably not changed for a century or a half a century.

We’re an owner operated business. People like me grow up as lawyers and then take these jobs. We don’t bring in CEOs and managers from the outside. And we tend to be pretty conservatively run. Most law firms are. Then we don’t usually retain a lot of earnings and use those to invest in new things, although that might be changing a bit with AI. And that’s the topic that people keep talking about, which is private capital was useful for contingency fee litigation. You mentioned that. And that’s a very specific use that’s not generally investing in the firm as a whole. And many firms use litigation funding, and it’s been a pretty productive arrangement for the firms and litigation funders.

I could see private capital providing specific funding for AI with a use agreement between the firm and the AI vehicle where it’s tailored just like litigation funding. But an overall investment in the law firm, similar to dentistry, for example, I think is hard.

I was talking to my dentist about this. He’s been a holdout, even though he’s been approached quite a bit. And he has a certain level of patient service that he wants to provide. And we’ve had these discussions with the private capital providers. Their motivation has been, can you see 20, 30 percent more patients a day because that’s more revenue? And that’s what they’re in business to do. I don’t think they apologize about that.

But practice of law is still a profession, and lawyers still have their way of doing things. That’s why it’s been an owner-operated model. And bringing somebody from the outside in to tell people how to do what they think they know how to do, particularly people as hard-headed as lawyers, I just think that’s a challenge for both sides. Be a challenge for the private capital provider, be a challenge for the lawyers that would have to work in that environment.

Roy Strom:

You mentioned private capital may be providing some amount of investment for firms to go stronger into AI. I mean, how much is the expense going to be? Is it going to alter the fundamental economics of the traditional large law firm?

Jon Van Gorp:

That’s the big question that everybody’s talking about. And I haven’t heard anybody put a figure out that makes sense. It’s hard to know. It’s hard to know whether the existing tools can be adapted efficiently to what you need, whether you have to develop proprietary tools to be successful. Everybody’s thinking about that. So I don’t have an answer for that. And that will reveal itself over time.

But you need to be forward thinking as to how that develops and how you invest in it. And so certainly every firm is investing in AI, not just hard dollars in the technology, but in lawyer time, because what we do here is we sell time. So people are taking time to experiment and beta test products before they’re trying to deliver them to clients.

But what I will say is that in the early days, I saw people looking at AI as internal use. Let’s help us manage the firm more efficiently by using AI tools to develop data, sort data, analyze data. The shift has been pretty immediate over the last six months, I would say, to client application because clients are asking us, how are you using AI? And how is that making my legal fees lower, more efficient, et cetera? And so the client demand is going to drive the pace of change in the level of investment. And it’s pretty early in that. And I can’t tell you exactly what it’s going to be. But the conditions are set up for this to continue to be a focus and for investment to continue to scale.

Roy Strom:

Yeah, I do think it’s going to be an interesting thing to watch for quite a long time.

You said last year that since President Trump’s executive orders targeting law firms, that some law firms are thinking twice about what kind of cases they’re willing to take on. I’m curious, given that those orders don’t appear like they will stand up in court, we haven’t seen the present issue anymore. Has that calculus changed at all? Or are you seeing any evidence that firms today are more willing to take on, for instance, cases against the government?

Jon Van Gorp:

It’s an evolving environment that people are adapting to. And every firm has different views and different approaches to this, depending on how they see the issues and the clients they represent, and the people in their firm. Ultimately, those are the things that inform how a firm approaches this.

First, it’s lawyers and it’s clients and makes decisions like we do around the world. We are an international business. 37% of our people sit outside the US. We’re no stranger to geopolitical dynamics. And so we’re adapting and navigating, and other law firms are, as the conditions around the world, not just in the US, continue to change.

Roy Strom:

That was John Van Gorp, the chair of Mayer Brown. And that’ll do it for today’s episode of On the Merits. For more updates, visit our website at news.bloomberglaw.com. Once again, that’s news.bloomberglaw.com.

The podcast today was produced by myself, Roy Strom, and David Schultz. Our editors were Chris Opfer and Alessandra Rafferty, and our executive producer is Josh Block. Thanks everyone for listening and see you next time.