The investors in law: Legal Futures Growth Summit

Wednesday, I gave the keynote address at the fabulous Legal Futures Growth Summit. My address was title The investors in law. Here is a copy of what I said.

Introduction

There’s a line from Hemingway that I’ve been using for almost a decade now. You probably know it. It’s the one about how a character in one of his novels went bankrupt.

“Gradually,” he says. “And then suddenly.”

I first borrowed it in 2018 when I launched my own consultancy after nearly a decade inside England and Wales’s regulatory system — first as deputy CEO of the Legal Services Board as we set it up from scratch, then at the SRA where I spent years trying to make the promise of the Legal Services Act real. Every year I dust that Hemingway line off. Change has been happening. Perhaps even accelerating.

And yet, every year, most law firms still look much the same as they did the year before.

So I want to start today with a question. Are we still in the ‘gradually’ phase? Or has the ‘suddenly’ finally arrived?

I think we won’t know the tipping point until we look back. But I think the reason is sitting in this room — or at least, the reason is what brought many of you to this room.

It’s capital.

Part one: what I got wrong – and what England & Wales really taught us

Let me go back to 2009. I was one of the founding team at the Legal Services Board — the new oversight regulator created to modernise legal services regulation in England and Wales. The Legal Services Act had just come into force. The promise was liberalisation. New business models. External ownership. Alternative Business Structures.

The legal establishment’s reaction was, shall we say, sceptical. There were warnings about the commercialisation of justice. Dire predictions about what would happen when profit entered the equation – as if law firm partners were not seeking profit already. What would happen when private equity got its hands on law firms. The professional independence of solicitors, we were told, would be fatally compromised.

They were wrong.

But not entirely — commercial activity always carries risk, and a few ABS firms have failed, just as law firms always have. But the liberalisation of the England and Wales market did not produce a race to the bottom. It produced hundreds of ABS -authorised firms doing more for more clients in more ways than the old market could. The emergence of genuine multi-disciplinary practice, technology driven law, M&A activity that has accelerated the consolidation of law firms, the growth of alternative providers and solicitors delivering legal services outside of law firms can all be traced, at least in part, to the opening of the legal market inspired by the Legal Services Act. 

From the inside of the SRA, where I later spent five years refining the ABS programme and rethinking the rulebook — I saw something striking. The fears that had dominated the policy debate were almost never realised. The opportunities were almost always underestimated.

Regulators get a lot wrong. But on ABS, England and Wales got it right. And the world has been watching. And learning.

Now, when I launched my consulting practice in 2018, I said that three forces were reshaping the legal market: regulatory reform, technology, and client pressure. I was right about all three.

But I underplayed a fourth. Capital. 

In 2018, capital was circling. It was cautious. It hadn’t yet committed. The investment theses were being written, but the deals weren’t being done at scale.

In 2026, capital has committed. And everything is accelerating. I speak with newly interested investment banks, venture capital, family offices, private equity, asset managers and sovereign wealth funds almost daily. And their reach is far and wide – England & Wales of course, but also the United States, Canada, Australia and increasingly Europe – particularly the Nordic countries, and just last week Switzerland.

Part two: the money arrives

Let me tell you what investors actually see when they look at the legal market. Because I spend a lot of my time in those conversations now, and the investor perspective is very different from the lawyer’s perspective.

They see a £40 billion market in the UK. A $400 billion market in the US. Markets that are fragmented, under-managed, under invested, and historically insulated from competition. Markets where the major participants have distributed their balance sheet to zero every year-end for decades. Which means very limited long-term investment in technology. No patient capital for M&A. Limited capacity to build something that outlasts the current financial year. A market where there are no national brands, and where the largest law firm in the world is just one eighth the size of Deloitte or Accenture. 

They see a profession where client demand is enormous — and largely unmet. Small businesses navigate extraordinary complexity without legal support. Ordinary people face tribunals, disputes, and life-changing decisions entirely alone. Even sophisticated corporates are trying to exert more control over legal spend not because they need less law, but because they can’t afford more. The legal market serves a fraction of the legal needs that exist. That is structural.

Investors see an opportunity: to bring capital, management discipline, and a longer-term perspective to firms that have been operating with one hand tied behind their backs.

Here’s the argument I find most compelling — and the one that most often gets lost in the debate. The private equity investment horizon, typically five years, is actually longer than the partnership model it replaces.

Law firm partners are overly focused on year-end profit distribution – investment equals lower pay. Their effective investment horizon is twelve months, perhaps less. Private equity thinks in years. A firm backed by patient capital can invest in technology, acquire complementary practices, build institutional resilience, develop talent — things the partnership model, for all its genuine virtues, by design has to balance against the year-end cash distribution.

Building for capital growth rather than cash distribution is not a minor point. It’s a fundamental shift in how firms can compete — for clients, for talent, and for the future.

The second force is the war for talent. In the UK, US firms are outcompeting on compensation in ways that traditional UK partnerships simply cannot match. Record partner pay. Eye-watering associate bonuses. And coming soon, equity participation — genuine long-term alignment between a lawyer’s performance and the firm’s value. For lawyers who might previously have aspired to partnership as the summit of their career, there is now an alternative model that is frankly more attractive – this isn’t the current elite cashing it out, it’s them building a new, sustainable model for law firms so they are fit to face the next 30 years. Part of that is to attract the technology leadership and talent that law firms need if they are to benefit from AI rather than be washed away in a tidal wave. 

These two forces — capital and talent — are deeply connected. And for UK firms, the combined effect is already being felt.

Part three: the United States – the last frontier

Now I want to talk about America. Because if England and Wales was the experiment, the start-up for external capital, then the United States is the scale-up.

For most of my career, the US legal market has been the great contradiction. The world’s largest, most sophisticated legal market — and yet the most restrictive when it comes to ownership. Non-lawyer ownership has been off the table for over a century, and the American Bar Association defended that position with a tenacity that exceeded my optimism bias.

But it is changing. Arizona amended its rules in 2020 to allow Alternative Business Structures. I had the privilege of advising the Arizona Supreme Court as they designed that programme. And the early evidence from Arizona is exactly what the England and Wales experience would have predicted: the sky has not fallen; clients are being better served; and the firms that moved early are growing.

There are now several States considering following Arizona. The American Bar Association itself is under increasing pressure from within. The Department of Justice and Federal Trade Commission have both indicated interest in competition in professional services. The direction of travel is clear, even if the pace is uncertain.

More significantly, US law firms and investors have already found ways to capture many of the benefits of external capital, even where full ABS isn’t yet permitted. Managed service organisations running alongside law firms — sophisticated parallel structures that separate the economics of legal practice from the practice of law itself. The structures are complex, but the principle is simple: where there is capital and demand, people find a way. They are like water flowing downhill, always finding the best path to lower ground.

The regulatory moat turns out to be less watertight than its architects intended.

Why are investors and law firms coming together in the US and why now? For the same reasons as in the UK and elsewhere. ABS opened their eyes to what was already possible with MSOs. And the strategic case is compelling in every jurisdiction: a stronger balance sheet allows for greater investment in technology, accelerated M&A activity, and the creation of a new currency of ownership, valued in the market and often taxed as capital, that attracts talent and locks them in through management incentive plans and long term share option schemes.

For UK firms, the implications of the US opening up are profound. US firms are already in London, competing aggressively on compensation. When that competition is backed by properly structured long-term capital, the gap between what they can offer and what traditional UK partnerships can offer will widen further. Imagine your competitor offering your talent a higher salary and a share option scheme that grows with the firm. The next chapter of the London legal market may well be written in the HQ of a Chicago law firm or in the offices of a Connecticut private equity house. Just as US law eroded the lockstep model, so the traditional partnership model will come under pressure.

Part four: what comes next?

So where does all this leave us? What does the next five years actually look like?

Here is my assessment, based on three decades watching this market from the inside — in public policy, as regulator, as reformer, as consultant, and now as adviser to investors deploying capital and law firms building for the future.

First: the pace of change will accelerate. We are past the point of debating if private investment will happen or become widespread. The question for law firm leaders is no longer whether to engage with external capital — it is what your strategic response would be if your major competitor has a strong balance sheet, backed by a long-term investor.

How, and when, and on what terms to engage with investors will become a key strategic driver for all firms. Waiting is itself a strategic choice.

Second: talent will become the defining competitive battleground. The firms that can offer genuine equity participation will have a structural advantage in attracting and retaining the best people. Those that cannot, will find themselves losing rainmakers, losing associates, losing clients, and losing ground. The talent war is already intense. Capital will intensify it further.

If you cannot offer a genuine share in the upside of the business to more and more of your people, then you risk becoming a talent farm for those that will. 

Third: we will see the emergence of genuinely global legal businesses with diversified ownership structures. For a look at what’s coming, consider what happened to the UK opticians’ market after deregulation at the start of the 1990s. Before it, most people bought glasses from a small independent practice — expensive, limited in choice, slow. The profession warned that commercial ownership would compromise clinical standards.

Then Specsavers launched and made eye tests affordable and accessible for millions. Prices fell. Access improved. The number of people getting their eyes tested went up, not down. But it wasn’t only about consolidation and mass market disruption.

The independent optician didn’t disappear — but the market transformed around them. Those that survived did so by being genuinely excellent at what they do, not by assuming the old model would protect them.

That is coming to law. Not every firm will be Specsavers. Some of the best will be Cubitts. But you need to know which one you are — and build accordingly.

The Magic Circle has been hesitant. Understandably — their partnerships are complex, their client relationships conservative, and their brand equity enormous. But that hesitation is becoming expensive. And I say this with genuine awe and respect for what those firms have built: if London’s elite firms do not act, the next generation of truly global legal businesses may be built around firms with a stronger focus on building capital value. And again, they may well be US headquartered.

Fourth — and most important — the firms that thrive will be the ones that are clear about their strategic purpose. Not every firm needs external capital. Not every firm should pursue it. There are excellent firms, built on genuine partnership values and deep client relationships, that will continue to do exceptional work without it.

But every firm needs to understand its options. Every firm needs to know its value — not just its annual profit per partner, but its enterprise value, its strategic position, its defensibility. And every firm needs a view on where it sits in a market that is already changing around it — and accelerating.

Part five: what should law firms do?

So, what do you actually do with all of this?

Three things. And they apply whether or not you ever take a penny of external capital.

First: know your enterprise value. Not your profit per partner — your enterprise value. What would a sophisticated buyer pay for your firm, and why? Most law firm leaders cannot answer that question. Investors answer it before they walk into the room. You should too. It changes how you think about strategy, about M&A, about talent — about everything.

Second: fix your talent architecture now. If you cannot offer genuine long-term participation in the upside of your firm — not just compensation, but a stake in what you’re building — you will lose people to firms that can. This isn’t hypothetical. It’s happening. The firms that move on this in the next two years will have a structural advantage in the talent market that compounds over time. The firms that wait will be funding their competitors’ recruitment.

Third: if you’re considering external capital, get fit before you take it. Understand your corporatised financials. Strengthen your leadership team. Build a governance structure that works for a capital-growth model, not just a cash-distribution one. Capital accelerates what’s already there. Arrive in good shape, and it accelerates your strengths. Arrive unprepared, and the absence of value will be stark to all.

Not every firm needs capital. But every firm needs a clear answer to the question: 

Close

I’ve spent my career in the unusual position of having seen this market from almost every angle. Spending time with David Clementi in the early 2000s to work through the benefits of non-lawyer leadership of a law practice. Encouraging the professional bodies to let go of their regulators. Helping design the rules as a regulator. Helping firms navigate them as a consultant. Working in legal markets around the world. Advising investors on where to deploy capital. Standing in front of the Arizona Supreme Court making the case for opening the market.

And the thing that strikes me, every time, is how rational all the actors are — and how difficult it is to predict what happens when those rational choices interact at scale.

Investors are rational. They see fragmented markets with unmet demand and structural barriers to investment coming down. They are going in. And going in to compete and win.

Law firm leaders are rational. They want to protect what they’ve built, serve their clients well, and leave something for the next generation. They are cautious about what they don’t yet understand.

Regulators are rational. They want to protect clients, maintain confidence in the system, and not be blamed for whatever goes wrong next. They move carefully.

The result of all this rationality right now is a market in transition. And markets in transition create opportunities — for those who move early, move thoughtfully, and move with a clear sense of what they are trying to achieve.

Monopolies are good for producers. Competition is good for clients. The legal profession has been a monopoly — in ownership, in access, in the shape of who gets to deliver legal services — for too long. The opening of the market is good for clients. It is also, I believe, good for the profession, if the profession is willing to adapt.

So the question I’d leave you with is not ‘will investors reshape the legal market?’ They already are. The question is: what role do you want to play in that reshaping?

Because the firms in this room have a choice that firms in five years’ time may not have.

The choice to shape the terms of engagement, rather than simply respond to them.

The ‘gradually’ is behind us.

The ‘suddenly’ is here.

Thank you.