Firms Need Capital to Pay for AI Tools. Could PE Investment Be the Solution?

Legal Services Transactions attorney Joshua Porte was quoted in an American Lawyer article exploring private equity investment as a solution for law firms looking to develop technological capabilities but lacking the capital to do so. The article highlighted that artificial intelligence (AI) and other emerging technology platforms require substantial upfront investment, and the traditional law firm structure is one that leaves little cash in reserve at the end of the year once partners are paid. Attorneys are thus looking to outside investment in the form of management services organizations (MSOs) to supply much-needed capital while still complying with restrictions on fee-sharing and nonlawyer ownership. Mr. Porte, who has advised on numerous MSO-law firm deals, said this option enables organizations to tap financial resources for a variety of areas, not just AI, and he has experience working with private equity sponsors who have "incredibly brilliant AI technologists on staff," making the partnership even more beneficial for legal professionals as they scale up.

"The MSO can help professionalize the back office of the firm. They can bring additional resources to bear," he explained.

READ: Firms Need Capital to Pay for AI Tools. Could PE Investment Be the Solution?