Private Equity Investment in Law Firms: While Busy Planning for the Royal Wedding Our UK Colleagues Seem to Already be Counting the Money They Will be Raking in From Non-Lawyer Investors under the Ne

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Our cousins across the pond are in a bit of a dither, engaging in anxious planning and preparation. No, I’m not referring to the nuptials planned by the royal family for Prince William and Kate Middleton. I refer to planning for the new Alternative Business Structures – or sometimes called the Tesco models in which non-lawyers will be permitted to invest in and become owners of law firms. We’ve been watching these events from afar and, frankly, we just don’t think ABS or Tesco models work for modern commercial law firms. There just does not seem to be a reasonable return available nor do existing ethical strictures make ABS models viable – either for the investors or for the law firm.

Thus far private equity investment in law firms by non-lawyers, which becomes permissible in the UK on October 11, 2011, has attracted a great deal of media attention and much brouhaha. Privet equity investors seem to be thinking there’s a huge pot of gold here. Law firm managers are already trying to figure out how to spend the millions of pounds that they believe will come pouring through their doors. Why, even the American Bar Association is beginning to eye the concept with some jealousy and trying to figure out how to join the gravy train.

But in my opinion there’s no gravy train here for full service commercial law firm. The economics just don’t seem to work and the ethical hurdles seem insurmountable.

We just don’t see that the ABS/Tesco model works or even makes any sense.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jerome Kowalski, Kowalski & Associates | Attorney Advertising

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