When Europe’s top court delivered its ruling on Germany’s Halmer case in late December, it seemed to slam the door on private equity investment in EU law firms. Yet, look closer and you’ll see PE slipping in the back door, from Phoenix to the U.K., Spain, and beyond.
England and Australia have allowed alternative business structures (ABSs) for more than a decade. Arizona started approving them in 2021. Spain’s ECIJA sold a stake to Alia Capital Partners last year so it could open new offices and attract partners.
A surprising number of firms are determined to raise capital, not just by converting to alternative business structures but also through service bifurcations that split the legal practice from the law firm’s service company—which may handle tech, admin or HR—averting the need for a regulated ABS structure.
Are these AmLaw 25 firms? Not yet. But some of those considering a PE injection have revenue north of $100 million, almost no debt and an exciting AI story, so investors expect the trend to trickle upmarket and the sky is the limit.
The turnover of the U.S. legal services market alone is estimated at $600 to $700 billion. Globally, it is thought to be $1 trillion, so law firms are seen as the last untapped gold mine. As one investor told Law.com: “If this sector liberalises and you are not in it—early—that’s going to be a problem for you.”
