Private equity group Charlesbank has made one of the biggest investments to date in a US law firm, ahead of what could be a wave of deals for firms that defend companies against liability claims. The investment, set to be announced on Monday, values Los Angeles-based Wood Smith Henning & Berman at about $700mn and uses an increasingly popular financing structure to circumvent rules that have historically barred private equity from US law.
At least two other insurance defence law firms are also exploring private equity deals using the same structure, according to people familiar with the matter. Investors have been drawn to the sector for its steady cash flows and opportunity for consolidation. Insurance defence firms defend clients against claims ranging from personal injury to product liability and workers' compensation. Cases are typically steered to attorneys by clients' insurance companies.
"We're in a very resilient industry and it doesn't really follow the economy," said Daniel Berman, WSHB co-founder. "There's claims when things are bad, there's claims when things are good in the economy." WSHB and Charlesbank declined to comment on the financial terms. WSHB has close to 600 attorneys across 43 offices in the US, and insurance companies are increasingly pushing to reduce the number of firms they work with.
The investment will allow WSHB to pursue mergers and acquisitions, hire bigger teams from other firms and invest in AI, Berman said. The deal uses a "management services organisation" (MSO) structure, which allows private equity to bypass US professional ethics rules barring non-lawyer ownership of law firms. Charlesbank will own a majority of WSHB's new MSO, of which Berman will be chief executive. Freeman Mathis & Gary of Atlanta and Tyson & Mendes of San Diego have both engaged banks to solicit bidders, according to people familiar with the matter.
Source: Financial Times Companies · Summarized by HeadlinesBriefing