Private equity has changed how law firms buy, sell, and grow. Tom Lenfestey, founder and CEO of The Law Practice Exchange (LPE), opened up his inbox for a live “Ask Tom Anything” webinar tied to his new book, The Exit Blueprint. Attendees asked pointed questions about managed service organizations (MSOs), management fees, and where private equity is headed next in legal M&A. Below is a practical rundown of what he said, organized for owners who are weighing an MSO deal or just trying to understand the buzz. Prefer to watch the full session? You can find the replay on YouTube. What an MSO Actually Is An MSO, or managed service organization, is a separate entity that holds every part of a law firm’s business that is not the practice of law. That includes marketing, HR, accounting, and technology. Anyone can own it, including a private equity firm, a family office, or a key non-attorney employee. The lawyers and the delivery of legal services stay inside the law firm, which in most states still has to be owned and controlled by licensed attorneys. Tom described two common uses for the structure. Lawyers set up their own MSO to centralize operations across multiple brands or locations, or to give a non-lawyer executive, like a chief operating officer, equity in something without giving them equity in the law firm itself. Private equity and other outside capital use the same structure to invest directly in a law firm’s growth, providing marketing and technology dollars in exchange for a services fee. How Management Fees Have to Be Structured One of the most detailed questions of the session came from an owner asking how to set a management fee that holds up as fair market value while still leaving room for margin and growth. Tom’s answer centered on one hard rule: the fee cannot simply track a percentage of law firm revenue. Under ABA Model Rule 5.4, lawyers generally cannot share legal fees with a non-lawyer, and a revenue-percentage fee can look exactly like that. Instead, the fee has to be tied to the actual fair market value of the services delivered, typically structured as a fixed monthly cost or a cost-plus arrangement based on defined variables. Tom was candid that there is no single published benchmark for this yet, and he recommended bringing in counsel who specializes in MSO agreements to make sure the structure will hold up to scrutiny. Key takeaways for setting a management fee Delineate exactly which services the MSO provides, then value each one at fair market rate. Use a fixed or cost-plus structure rather than a straight revenue percentage. Expect meaningful profit to remain inside the law firm; the MSO cannot pull out everything. Get specialized MSO counsel involved early, since these agreements are complex by design. Where Private Equity Is Actually Investing Personal injury has drawn the earliest and heaviest private equity interest. Tom pointed to the model’s scalability: heavy marketing investment, less dependence on any single attorney, and strong intake systems that keep revenue flowing even if an individual lawyer leaves. Interest has since spread to immigration, family law, trust and estates, insurance defense, and social security disability, though fewer firms in those areas currently hit the roughly $10 million EBITDA threshold that larger private equity groups tend to require. He expects smaller private capital players and boutique MSOs to acquire and roll up smaller platforms in these emerging practice areas, eventually banding together into larger institutional deals. Is Private Equity or an MSO Right for You? Tom’s central message: private equity is simply another type of buyer, not the only option. Strategic law firms, individual attorneys, and traditional buyers remain active in the market. The right fit depends on your goals, your growth plan, and whether a potential partner’s vision for the firm matches your own. He encouraged owners to treat the buyer search like a dating process rather than defaulting to whoever shows up with the most capital. How Far an MSO Can Go Regulators and bar associations are watching MSO structures closely. Tom’s rule of thumb, credited to attorney Josh Port at Holland & Knight: the MSO exists to support the lawyers, not direct them. An MSO can build marketing systems, train intake staff, and improve technology, but it cannot dictate which clients a lawyer takes or interfere with how legal services are delivered. Firms considering an MSO transaction, especially outside states with more permissive rules, should also track how state legislatures are treating the structure. LPE’s blog has covered how states like Illinois are responding to private equity in law with renewed restrictions rather than liberalization. Long-Term Incentives That Keep Everyone Aligned For sellers worried about being cashed out and then watching value evaporate, Tom outlined the structures LPE sees most often in MSO and private equity deals: Retained equity: the seller rolls a portion of purchase price into ongoing equity in the MSO, which can grow as it acquires other firm brands. Performance earnouts: a percentage of future revenue, adjusted up or down as the firm’s numbers change after closing. Variable seller notes: common in SBA-backed deals, where note payments adjust based on post-closing revenue performance. Escrow releases: a portion of proceeds held back and released as specific milestones, such as employee retention, are met. Considering an MSO or private equity transaction for your firm? LPE’s advisory team helps owners evaluate whether outside capital is the right fit, structure fair market value management fees, and negotiate long-term incentives that protect what you’ve built. Learn more about selling your law firm or explore how law firm valuation actually works. Book a Free 15-Minute Strategy Call Frequently Asked Questions What does MSO stand for in a law firm sale? MSO stands for managed service organization. It is a non-law entity that houses the business side of a law firm, such as marketing, HR, accounting, and technology, while licensed attorneys keep control of legal services inside the law firm itself. Can a non-lawyer own an