Private equity investment may transform compensation structures in the US legal sector, according to the founders of Massumi + Consoli, a mid-market M&A advisory firm that recently sold a stake to Dallas-based Trive Capital. The deal, completed earlier this year, positions the firm as a potential pioneer for the growing presence of outside capital in the traditionally attorney-owned legal industry.

Massumi + Consoli’s founders, Peter Massumi and Tony Consoli, both former attorneys at Kirkland & Ellis, have developed a novel ownership and management model intended to attract new partners by offering equity incentives linked to eventual liquidity events when private equity sells its stake. The firm, established in Los Angeles in 2015, has expanded to over 70 lawyers and generates more than $100 million in gross revenue annually.

Tony Consoli argued that the involvement of private equity could ease the intense competition among firms to poach top legal talent, a dynamic that has driven compensation and billing rates upward. He suggested that aligning lawyers’ interests with long-term firm ownership could reduce turnover and foster a culture focused on building sustainable value, ultimately benefitting clients.

The model relies on a "management services organisation" (MSO) structure, separating the firm into two entities: an attorney-owned legal practice delivering advice and an MSO managing administrative functions, technology, and other assets. The MSO charges fees to the legal firm sufficient to generate profit and is owned jointly by the lawyers and private equity investors. This structure skirts existing US regulations that generally prohibit law firms from having non-attorney ownership.

Peter Massumi highlighted examples from other professional services sectors, such as accounting, where similar arrangements have provided partners with multiple opportunities for liquidity events over time. He predicted that if the approach gains traction within the legal market, younger partners could benefit from several cycles of equity monetization.

Despite its promise, the MSO model has not been widely embraced by larger law firms, with some expressing reservations about potential impacts on firm culture, complications in sharing future profits with external investors, and the logistical challenges of securing consensus among numerous partners. Thus far, most private equity arrangements using MSOs have involved smaller personal injury law firms rather than major practices.

Massumi + Consoli planned to publicly unveil its new structure recently, alongside announcing the hiring of Shon Glusky from the global firm Sheppard as chief strategy officer. Glusky is expected to spearhead a recruitment campaign aimed at attracting lawyers from competing deal advisory firms, leveraging the firm’s novel ownership framework as a differentiator in the competitive legal market.

As external capital eyes expansion into the legal space, Massumi + Consoli’s experience may serve as a reference point for other firms contemplating the integration of private equity into their business models. However, debate continues over whether such partnerships can coexist with professional legal standards and the traditional law firm ethos.