The influx of private equity money under the facade of “back office” investments is throwing fuel on the fire that is the mass commoditization of personal injury cases.
Take this Arizona personal injury law firm that just sold its “back office” for $125 million, according to Bloomberg Law.
Let’s be honest about what that actually means.
No one is paying that kind of money for HR, accounting, or intake software.
They’re paying for the value of the legal fees. It’s the pipeline that’s incoming and outgoing.
Investors can’t own law firms or share in legal fees, so this is how they get there (except in Arizona where you can have an ABS but this MSO structure for this Arizona firm seems to avoid the oversight associated with an ABS).
These deals are total fictions. Buy everything around the law firm, and just label it an MSO and you’re good to go. Different label, same reality.
Once you put $125 million into the engine, the incentives change, whether anyone wants to admit it or not.
That kind of investment doesn’t get paid back by slowing down, developing cases, and taking risks.
It gets paid back by volume, conversion, and moving cases through the system. It comes from monetizing everything you can.
The flood of private equity money will be bad for clients who need a lawyer who puts the client first and not the firm’s EBITDA, KPI’s, and profits.
What do you think? Join the conversation with me on LinkedIn.
