Legal MSOs
Question #1: Governance Provision
Should an MSO Have Control Over Hiring Equity Partners Under Any Circumstances?
Suppose an MSO offered $50M for an equity stake in your law firm but one of the provisions in the agreement stated that under certain circumstances, they could stop your firm from hiring a new, lateral attorney as an equity partner. Are there ANY circumstances under which a Board of Directors with non-attorneys on it, should be able to stop such a hire? Would you sign it?
What the Experts Say:
The better question isn't whether an MSO can have influence—it's whether it has control. An MSO can absolutely provide input, raise concerns, conduct diligence, and share its business judgment. But the lawyers must retain the authority and responsibility to decide who joins the partnership. The Rules of Professional Conduct do not require lawyers to ignore good business advice from nonlawyers; they require lawyers to ensure that the ultimate decision remains an exercise of independent professional judgment, not non-lawyer direction or control.
Trisha Rich
Partner & Chair of the Legal Profession Team
Holland & Knight LLP
trisha.rich@hklaw.com | www.hklaw.com
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To attend a roundtable or schedule a free, individual meeting, contact us at admin@sheltonsteele.com
Question #2 Preparing in Advance for an MSO Deal
Your website and tech stack are an absolute nightmare. Should you upgrade them so that you'll be more modern and attractive to MSOs?
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What the Experts Say:
​"Flat out No. Never make ANY major investments prior to entering negotiations with a Legal MSO - at least not without consulting an advisor. Legal MSOs are looking for what they refer to as 'Levers they can pull'. Levers are areas where they can use their capital and the strength buying power to give the law firm they invest in, improvements that will help them become more profitable. Upgrading tech and websites are obvious and easy ways for them to improve a firm's profitability on an near immediate basis. Other 'Levers' might include modernizing and improving a firm's marketing, client intake and management, billing and AP / AR etc.
Law Firm Side Advisor
Shelton & Steele LLC
fs@sheltonsteele.com www.sheltonsteele.com ​​
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Disclaimer
The information, commentary, opinions, transaction concepts, illustrations, deal structures, and educational materials presented on this website are provided solely for general informational and educational purposes. They are intended to help law firm owners better understand the evolving Legal MSO marketplace and should not be construed as legal, tax, accounting, investment, securities, valuation, or financial advice.
Neither Shelton & Steele LLC, Frederick L. Shelton, nor any attorneys, investors, accountants, consultants, or other professionals quoted or referenced on this website are providing legal advice through this publication. Every Legal MSO transaction is unique. The appropriate structure, valuation, tax treatment, governance model, regulatory considerations, financing terms, compensation arrangements, and ultimate outcome depend upon countless variables specific to the parties, jurisdictions, business objectives, financial condition, and negotiated terms of the transaction.
Examples, hypotheticals, diagrams, transaction structures, and discussions are intentionally simplified to illustrate concepts and should never be interpreted as recommendations or as reflecting the only, best, or appropriate way to structure any transaction.
Before entering into any Legal MSO transaction, readers should obtain advice from qualified legal counsel, tax advisors, accountants, valuation professionals, and other advisors experienced in Legal MSO transactions and the applicable laws governing their jurisdiction.
The inclusion of comments, opinions, interviews, or quotations from attorneys, investors, or other professionals does not constitute legal advice, investment advice, or an endorsement of any particular transaction, structure, investor, MSO, or strategy. The views expressed are those of the individual contributors and are intended to foster discussion and education regarding an emerging area of the legal services industry.
No attorney client relationship, fiduciary relationship, investment advisory relationship, broker dealer relationship, or other professional relationship is created by your use of this website or by your reliance upon any information contained herein.
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