Scott Mozarsky comments on the legal market
Below is an excerpt from an article originally posted on Law.com, titled “The Newest Law Firm Partner: Private Equity.” To read the full article please click here.
“It’s easy to imagine why a law firm lacking the balance sheet to win talent battles might desire an infusion of capital to bolster its competitiveness. But why would this new focus on talent in the legal asset class appeal to investors? Scott Mozarsky, Managing Director at JEGI CLARITY, cites a confluence of factors.
First, regulatory changes and transactions in adjacent sectors have opened investors’ eyes to law firms as an untapped market. “Arizona’s decision to liberalize Rule 5.4 has been a catalyst for investors to take a harder look at the art of the possible relating to investments in law firms,” said Mozarsky. “The recent wave of successful roll-ups in accounting and tax advisory, which have been executed using MSOs, has also been a strong driver. Investors are realizing that the law firm market is larger than they had imagined: it’s a very profitable and scalable business that can benefit from pattern recognition and perspective of financial sponsors. And the multiple private equity-backed roll-ups in accounting, which has similar ethics and regulatory rules to the legal market, are highly relevant proxies.” Mozarsky believes legal talent as an asset class would meet an investor base that is already primed to pursue legal sector deals.
Second, as compared to litigation finance opportunities currently available to institutional investors, legal talent could offer a less risky return profile. Rather than sharing in the return on a subset of a practice group’s matters, a capital provider facilitating the hiring of a group would ultimately be able to benefit from the group’s revenue pool as a whole. This has the potential to appeal to investors seeking a relatively more predictable, private equity-like return. In addition, legal talent investing would offer exposure not only to litigation but to transactional and regulatory practice areas as well.”