New York law firm Cohen & Gresser is in advanced discussions to sell a significant stake to a private equity group, in a potential deal valued at approximately $40 million (£30.5 million). This move comes just weeks after another major US firm, McDermott Will & Emery, revealed its own explorations into restructuring for external capital.
A Strategic Move Amidst Industry Change
The negotiations centre on the sale of a $40m (£30.5m) convertible note, a financial instrument that would later be exchanged for equity in the business. Lawrence Gresser, the firm's co-founder and managing partner, confirmed the talks to the Financial Times, stating, "We have been preparing our firm for the entry of modern finance into the legal sector for over a decade." If successful, a formal agreement could be finalised as early as the first quarter of next year.
Founded in 2002, Cohen & Gresser expanded with a London office in 2018 and has built a reputation representing high-profile clients such as Sam Bankman-Fried and Ghislaine Maxwell. This potential deal is part of a broader, transformative trend where US law firms are increasingly seeking outside investment.
Navigating Legal Hurdles for Private Equity Investment
The US legal industry faces a significant barrier: stringent laws that historically ban non-lawyers from owning law firms. This has made it difficult for private equity and other external funders to invest directly. However, firms are now employing complex structures, such as managed service organisations (MSOs), to circumvent these traditional restrictions.
A regulatory shift is also underway. Several states, including Washington, Utah, and Arizona, have now permitted Alternative Business Structures (ABS). These new models legally allow non-lawyers to invest in legal service providers, opening the door for the kind of capital infusion Cohen & Gresser is pursuing.
Growing Private Equity Appetite for Legal Services
The interest from private equity is not isolated. Earlier this month, US firm McDermott Will & Emery was reportedly exploring a complex restructuring to facilitate private equity investment. Ira Coleman, the firm's Chair, noted that McDermott is "constantly approached and we always listen to new ideas," adding they are "excited to learn from other leading organisations as we challenge the status quo."
This trend extends beyond law firms. Back in August, legal financial firm Burford Capital was also in talks to buy stakes in unnamed US law firms. Over the past year, private equity has been actively circling the professional services sector on both sides of the Atlantic, with the mid-level accountancy market being a particular focus.
The potential deal with Cohen & Gresser signals a pivotal moment, indicating that the floodgates for private equity investment in elite US legal practices may be beginning to open.
