Private Equity Woos Personal Injury Law Firms With Profits, Tech

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Private equity is aggressively investing in personal injury firms, offering their lawyers a cut of the wealth generated by the deals.<br>At a first-of-its-kind, invite-only conference in Holland & Knight’s New York office last month, advisers made it clear that such arrangements are no longer theoretical. One of the firm’s private equity-backed clients has closed two deals this year, and a lawyer there expects to wrap up a dozen in 2026.<br>Personal injury lawyers who attended the conference came away with a keen sense of private equity’s encroachment on their turf, both the reward and the risk. The investment can bring in needed cash, fast. But with the promise of investor-backed call centers and lead generation companies, some of the lawyers see the need to adopt the private equity model or find themselves being out-competed in the legal marketplace.<br>“With private equity coming into the market, if you sit on the sidelines and do nothing about it, you put your business at risk,” said Houston-based personal injury firm leader James Amaro. “They’ve already done their homework and they’re moving fast.”<br>Major players including Apollo Global Management, Fortress Investment Group and Stifel Financial Corp. are all showing interest, attending the Holland & Knight confab.<br>Personal injury firms are a first-line test for private equity’s foray into the legal profession. Private equity’s capital infusion brings technological enhancement in the age of AI, but skeptics worry investor influence will cross over into client services from these deals.<br>“They were designed to get lawyers drooling for money,” said Bruce Pfaff, a former personal injury attorney working in Illinois to slow PE investments in law firms.<br>“By having people that lawyers rely on to get their work done employed by somebody else makes zero sense,” he said. “What they’re really doing is taking those who own the law firm and enriching them with the upfront payment.”<br>Apollo and Fortress declined to comment. Stifel did not respond to a request for comment.<br>The MSO Strategy<br>Amaro Law Firm is a client of Holland & Knight’s that is trying to arrange initial terms for a capital infusion by the end of the year through an investment vehicle that would place all of his firm’s non-legal functions into a separate entity called a management services organization (MSO).<br>Most US states prevent non-lawyers from owning or profiting from a law firm, constraining the legal industry’s access to growth capital. Taking a cue from the medical and accounting fields, law firms are separating their non-legal functions, such as IT, human resources, marketing, and client intake, into private equity-backed MSOs.<br>MSOs solve the legal profession’s growth limits by separating the business from the practice of law. Investors view the vehicles as their entree into a new industry, with some private equity firms aiming to provide the administrative support for multiple law firms before cashing out their stakes in the firms.<br>“There’s tens of billions coming into the market,” said New York personal injury lawyer Michael Licatesi, who is actively entertaining investment offers. “If solo practitioners and midsize firms don’t adapt or come up with some defensive model, the cost-per-acquisition of cases will drastically go up, because there’s so much competition coming in that can handle cases for a lower cost.”<br>The earliest MSO adopters aren’t large corporate law firms but attorneys with their faces plastered on highway billboards.<br>“When you are driving on the interstate and you see billboard after billboard, almost all of them are ads for personal injury firms,” said Josh Porte, a partner at Holland & Knight who advises law firms and investors on MSO transactions. “Private equity looks at that and says, ‘It’s a marketing business. I know how to partner with a marketing business and increase market share.’”<br>Personal injury firms are most commonly owned and operated by a small number of founders who in their later age seek liquidity as they ready their exit from the profession. This structure of...