Private Equity-Big Law Tie Ups Could Disrupt Associate Careers

Private equity and Big Law appear increasingly destined for the equity-ownership altar. Such a marriage was unthinkable a generation ago, thanks to longstanding bans on non‑lawyer ownership and control of law firms. But that prohibitionary wall has been chiseled away—first by litigation finance and outsourcing, and more recently by jurisdictions relaxing ownership limits (notably the UK, Australia, and Arizona).

The management services organization, or MSO, model goes yet a step further, replacing the chisel with a jackhammer. In its simplest form, the model splits a firm into two entities. One practices traditional law, while the other—the MSO—owns and runs the “non‑lawyer” functions: human resources, payroll, billing, business management, office leases, and (increasingly) information‑technology infrastructure. The law firm then buys or leases those services back under an affiliate contract.

The MSO business pitch is seductively simple: Let lawyers lawyer, while professional managers—and their investors—handle everything else. And there are plenty of examples to go around: MSOs long ago penetrated medicine, dentistry, accounting, and other professional services. Perhaps their arrival in law was only a matter of time.

That time has now arrived, with major US law firms actively investigating the model, including the recently merged McDermott Will & Schulte. Although there are good reasons to be open to the MSO experiment, the transition may raise risks that lawyers—and regulators—can’t afford to ignore. And the accelerant for it all appears to be (what else?) AI.

AI Twist

Legally trained large language models continue to make impressive strides, providing efficient help with due‑diligence checklists, regulatory filings, and first‑cut drafting. Many private models are trained, at least in part, on a firm’s historical work product. And while they are still far from perfect today, they will only get better with time.

Now add an MSO to the mix. If “IT services” reside within the MSO, as is common, the MSO could own, operate, and continuously train a private LLM—selling its outputs back to the law practice. As the LLM continues to improve, lawyers increasingly risk becoming glorified conduits for AI‑generated analysis.

In the meantime, junior partners and associates are still needed, not only to check for hallucinations and spurious results but also to produce the memoranda, markups, and deal documents that will calibrate the model dynamically—effectively transferring their experience and judgment into the MSO’s future asset pool. And as client deliverables become progressively anchored to the model’s output, the IT portion of the MSO is poised to capture an outsized share of law firm invoices. Whether this is a good thing depends on one’s perspective.

Winners and Losers

Clients will no doubt applaud clearer invoices and lower charges from the MSO model, at least initially. And many a senior partner is sure to cheer on this development, too, for a simple reason: PE investments monetize both current goodwill and future client flow through a one-off cash transaction, letting today’s senior partners absorb the cash payout in the form of higher salary and bonuses before sailing into retirement.

But junior partners, non‑equity partners, and associates are unlikely to celebrate. After investment proceeds are distributed and the MSO is cleaved away, the legal practice may be functionally forced into “buying back” its own historical expertise through LLM queries. The end result may be that there will be less left over for future lawyer cohorts at the law firm, even as those same cohorts are expected to correct errata and train the model for the sake of improving accuracy (and the MSO’s future profitability).

With diluted ownership of their own work product, will these cohorts play ball or will they decamp to non‑MSO firms? And even if they stick around, will they sprout alligator arms when it comes to sharing their own client materials, or strategically convince their clients to forbid the use of confidential documents to train the model?

Professional Association Tripwire

State bar authorities and professional associations (such as the American Bar Association) will elbow in on the party as well. ABA Model Rule 5.4 still forbids non‑lawyer ownership of the practice of law in most jurisdictions. If an MSO‑controlled LLM comes to dominate legal service delivery, has the firm ceded de facto control of legal operations and professional judgment?

If so, the claim that the MSO isn’t “practicing law” becomes harder to defend, inviting a stiff-arm that could reverse the pendulum swing—re‑internalizing AI tools and training within lawyer-owned firms. Ironically, younger lawyers who may roll their eyes at many professional guardrails could become their biggest defenders here.

A Wise Move?

Is the MSO a wise move? Like most interesting legal problems, this question invites a characteristically lawyerly answer: It depends. Although the promise of attracting private equity investment capital is intriguing, the threats of the MSO structure noted are just as real. We suspect some firms may simply wait on the sidelines, at least for now, while others plunge ahead.

For that latter group, several practical challenges require top-line attention for any incipient MSO structure:

• Governance and Independence: Licensed lawyers must retain ultimate authority over legal work—navigating conflicts and exercising professional judgment.
• Property Rights: The structure should be clear about who owns work product, training data, model weights, and improvements—and address cross‑client reuse of data. In some cases, it will be more expedient to keep these rights within the lawyering side of the organization.
• Economic Incentives: If younger and incoming cohorts are expected to catch and fix errors and train the model dynamically, they will need sufficient incentives to do the work, such as bonuses, equity participation, and transparent promotion paths.
• Pricing: The fees charged by the MSO will need to benchmark and possibly limit transfer prices so the MSO doesn’t become a firm-killing profit siphon.
• Attorney-Client Privilege: The structure should be candid with clients and attorneys about when and how AI is used, and how confidential information is protected.
• Exit: Legal practices are inherently dynamic, and individual lawyers and practice groups can come and go. How will the MSO structure affect what happens to data and models at such moments? Will it cause the firm to become hostage to its own expertise?

Private equity can bring scale, systems, and discipline to legal services. But absent thoughtful architecture, the MSO model risks shifting control and value away from the lawyers who owe duties to clients and the courts. Firms that embrace this approach will need to think carefully about structural design. And to answer this challenge, they may require a good (most likely human) lawyer.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Dorothy S. Lund is the co-director of the Ira M. Millstein Center for Global Markets and Corporate Ownership and a law professor at Columbia University.

Eric Talley is also the co-director of the Ira M. Millstein Center for Global Markets and Corporate Ownership and a law professor at Columbia University.

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