MSOs Emerge as a Viable Law Firm Succession and Investment Solution

Management Services Organizations (MSOs) are transforming the legal industry, creating a viable law firm succession alternative that bypasses internal buyouts, competitor sales, or costly wind-downs. Tom Lenfestey of Law Practice Exchange wrote about the trend for Bloomberg Law.

MSOs are based on corporate models adapted from the healthcare industry. Law firm founders can sell the administrative infrastructure of their firm to the outside investors. At the same time, the founders retain legal ownership of the firm and their all-important client relationships.

MSOs are also unlocking capital for operational modernization, giving well-positioned firms a competitive edge that traditional partnership structures simply cannot match. Three significant industry developments are fueling the MSO momentum.

Last June, Puerto Rico’s Supreme Court ruled to allow up to 49% non-lawyer ownership of law firms, offering a low-barrier entry for outside investment. In November, McDermott Will & Schulte confirmed it was exploring MSO structures, a sign that elite firms are moving in this direction. And in February 2025, Arizona licensed KPMG Law US as the first Big Four accounting firm authorized to practice law in the United States.

These shifts carry particular weight given that 40% of law firm partners expect to retire within the decade. Succession planning is becoming increasingly important as the legal workforce ages. According to the article, 63% of firms report that they have partners aged over 60 who control 25% or more of the firm’s revenue.

MSOs sidestep ABA Rule 5.4 fee-splitting prohibitions by having investors acquire a separate administrative entity rather than equity in the law firm itself. Capital flows through fixed-fee or cost-plus service arrangements.

Firms using MSO investment are deploying AI research tools, upgraded cybersecurity infrastructure, and sophisticated case management systems. There are risks, which include operational budget control shifting to non-lawyers, cultural disruption, and significant regulatory uncertainty. Most state bars have yet to weigh in on MSO structures.

Due diligence for any MSO transaction demands scrutiny of operational maturity, partner retention mechanisms, and jurisdictional compliance. Ethics rules vary greatly by jurisdiction, requiring careful deal structuring to avoid Rule 5.4 violations.

Board governance and fiduciary duties merit close attention as non-lawyer involvement in operational decision-making blurs traditional boundaries of attorney independence.

Today’s Managing Partner recently wrote about how law firms with MRO structures are appealing to private equity investors.