Senior partners at the international law firm Freshfields have been exploring the possibility of spinning off their in-house artificial intelligence (AI) division into a separate company that could be valued at billions of dollars, according to internal emails obtained by a news organization. The discussions are at an early stage and may not necessarily result in a formal separation.
The AI unit, known as Freshfields Lab, develops technology aimed at enhancing legal work, including tools for document analysis and platforms to support litigation management and due diligence processes. Global managing partner Alan Mason communicated in a Friday email to Ethan Klingsberg, co-head of US corporate and mergers and acquisitions, that he was dedicating significant effort toward restructuring the AI business into its own legal entity. This restructuring would enable external investment or an initial public offering (IPO). Mason referenced interest from two Wall Street banks regarding the initiative.
Mason highlighted that legal technology companies typically attract valuations ranging from 25 to 40 times their revenues, suggesting that separating Freshfields Lab could unlock substantial financial value. Klingsberg estimated that such a standalone entity could be worth "probably billions," and both partners agreed that the move had the potential to generate considerable revenue for the firm.
By way of comparison, some prominent AI-focused legal technology companies, such as Harvey and Legora, are currently valued at $15.5 billion and $5.6 billion respectively. Klingsberg drew on a US technology company's model as a reference point, describing how that firm maintained control over its AI division to facilitate a tax-free spin-off while securing considerable cash influx. Part of the funding was reportedly used to retain talent within the unit.
An unintended distribution error occurred when Mason accidentally forwarded the email exchange to a broad internal list. Although the messages were quickly recalled, some recipients captured screenshots of the correspondence.
Klingsberg explained that the idea to separate the AI business had only recently emerged. He noted that when a company develops a valuable internal asset, it may make sense to isolate it to avoid diluting its worth within the broader organization. While Freshfields Lab’s AI tools have the potential to be marketed to corporate legal departments and competing law firms, this step has not yet been taken.
Across the legal sector, firms are increasingly investing in AI, either through proprietary development or by integrating third-party systems, as part of efforts to adapt to technological disruption. Although AI is not currently advanced enough to challenge the upper echelons of legal practice, firms see opportunities to augment junior-level and routine work with these tools.