Private equity’s interest in law firms is no longer a fringe conversation. On a recent episode of The Rainmaking Podcast, Federate Co-Founder and Managing Partner T.J. Henry Jr. joined host Scott Love to talk through what’s driving that interest and what it means for firm leaders weighing a management services organization (MSO).
The conversation covers law firm mergers, private equity activity and how MSOs work in practice, from the difference between a captive and a vendor MSO to what belongs in the agreement between an MSO and a law firm.
Henry walks through a hypothetical: a 50-attorney firm whose leaders want to keep practicing law without also running every part of the administration. He explains the paths available to a firm in that position, including bringing in a vendor MSO like Federate or establishing a captive MSO of its own.
He also discusses the potential benefits of a captive MSO, including improved client service, tax considerations, succession planning and future optionality, along with Federate’s own model for running 80 to 90 percent of a firm’s back office under a flat monthly fee per timekeeper.
On the investment side, Henry explains how contract length and protections differ depending on the structure. Vendor MSO agreements, he notes, are often shorter, running one to three years, while third-party investment MSO contracts he’s seen have typically run 20 years or more.
Listen to the full conversation below, or on Apple Podcasts, or YouTube.