Investors Chase Law Firm Back Offices as Arizona Interest Cools

Corporate attorney Pippa Balestrieri was quoted in a Bloomberg Law article about waning interest in Arizona's alternative business structure (ABS) framework for investing in law firms and legal services providers. The state's ABS program allows nonlawyers to own law firms, in contrast with the rest of the country that adheres to strict rules against nonlawyer ownership, and its goals include increasing outside investment and making legal operations more efficient. However, this year the state's ABS committee updated its regulations to require ABS firms to provide legal services instead of solely making referrals and to devote part of their business to serving Arizona residents. These updates, combined with the rise of management services organizations (MSOs), mean private equity firms and outside capital investors are more often looking at other structures to enter the legal industry. Pippa, a member of Holland & Knight's Legal Services Transactions Team, confirmed this trend, observing that the "vast majority" of investors and law firms are choosing MSOs over nonlawyer ownership and are "less likely to even ask" about Arizona's ABS options.

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