U.S. law firms adopt MSO structures to fund AI-driven expansion

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US law firms adopt MSO for AI

Highlights

U.S. law firms are increasingly adopting MSO structures, allowing private equity and venture funds to fund AI and operational expansion, bypassing traditional ownership restrictions.
Major firms like Kirkland & Ellis allocated $500mn for an internal AI platform and entered a multiyear partnership with Palantir to enhance technology for private equity clients.
AI adoption and MSO models are driving a shift toward value-based pricing for routine legal services, intensifying competition on cost structure across the legal sector.

AI-focused structures gain traction

As reported by Financial Times, management services organisation structures are gaining momentum in the U.S. legal sector because they allow outside investors to fund the operational and technology side of law firm businesses. Under the model, the lawyer-owned entity handles legal casework, while a separate MSO owns intellectual property and manages functions such as technology and back-office operations.

The arrangement opens a path for capital from private equity, venture funds and entrepreneurs, groups that are traditionally barred from owning stakes in U.S. law firms under professional ethics rules. Peter Sacripanti, chair of Broadfield and former longtime co-chair of McDermott Will & Emery, says rising billing rates and improving AI capabilities are pushing the sector toward change.

New entrants are using the model to build AI-native firms that rely on AI agents for work historically handled by junior lawyers. Norm Law, an offshoot of legal tech company Norm AI, uses technology developed by legal engineers for due diligence and compliance work, while its lawyers apply those tools for financial services clients. Chair Mike Schmidtberger, who took the role in January 2026 after 35 years at Sidley Austin, says the firm aims to match or undercut the cost of traditional firms on routine corporate matters.

Pressure builds on Big Law pricing and investment

Lawyers advising on these deals say the surge in interest is closely tied to the rise of generative AI. Josh Porte, a partner at Holland & Knight who has worked on more than a dozen MSO deals, says the structure is well suited to firms that need close coordination between lawyers, software developers and business teams.

Large incumbent firms are also responding. Kirkland & Ellis recently says it set aside $500mn for its own AI platform and agreed a multiyear partnership with Palantir to develop fundraising technology for private equity clients. McDermott Will & Schulte is among firms considering a shift to an MSO structure partly to raise capital for technology spending.

The competitive impact could extend to pricing models across the legal sector. Executives expect firms to charge more often on the basis of client value rather than hourly billing when AI helps deliver routine services more efficiently, although complex litigation and high-end deal work may remain less suited to fixed pricing. John Budetti of M37 LegalTech Strategies says clients are signalling an urgent desire for greater competition, even as both established firms and new AI-native challengers face difficult adjustments.

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