Law firm McDermott Will & Schulte said last week that it’s weighing a possible stake sale to private equity after being approached by multiple suitors.
“This is all very preliminary and we are fielding inbound interest,” firm chairman Ira Coleman said in a statement. “We’re excited to learn from other leading organizations as we challenge the status quo.”
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The Financial Times reported that Zack Coleman, the chair’s son, has been leading the firm’s exploratory efforts, which have included preliminary work with bankers and advisers. The younger Coleman joined McDermott in July from Odyssey Investment Partners after starting his career at Moelis in 2015.
Because non‑lawyers cannot own law firms or split legal fees, any deal would require the firm to adopt a managed services structure that allows sponsor involvement while maintaining lawyer ownership.
The potential restructuring would split the business into a lawyer‑owned advisory practice and a separate managed service organization that licenses the brand and sells IT and administrative functions to the law firm. Investors would own the MSO, creating a contractual revenue stream from services purchased by the lawyer‑owned firm.
McDermott was formed this year through the combination of McDermott Will & Emery and Schulte Roth & Zabel. Its combined 2024 revenue of $2.8 billion places it among the top 20 firms globally.
While a handful of small practices have tested the controversial MSO structure, no larger firm has yet attempted the approach. If McDermott can bring on an investor without triggering the professional ethics violations opponents believe are possible, its scale could set a precedent for other Big Law firms considering similar options.
Because of these regulatory hurdles, law has remained one of the few professional services verticals without widespread private equity involvement. As that begins to change, opportunistic sponsors see a chance for early movers to get deals done at attractive valuations before the sector becomes more saturated.
Lee Minkoff, managing director at legal services-focused private equity firm Renovus Capital, told Bloomberg Law that McDermott’s peers are receiving similar interest.
“All major law firms are having these conversations,” Minkoff said. “They’re not saying we should do it, they’re saying, well, we need to learn what it means and what it looks like and what others are doing.”
He also now expects the trend to happen on an accelerated timeline: “There’s been a lot of chatter in the market” about sponsor MSO investment. “I do think the MSO transactions will begin to happen in Big Law. I thought it was a couple years away. I think it could be potentially sooner.”