Santa Monica-based Wood Smith Henning & Berman has become one of the largest national law firms to score private equity backing through an increasingly popular workaround that keeps legal decisions in partners’ hands.
The 600-attorney civil litigation and insurance defense firm signed a deal with Charlesbank, a Boston-based buyout shop, to invest in a back-office support team – also known as a management services organization – called WSHB Support Services. While traditional ethics rules bar direct outside investment in professional services firms, MSOs have served as a loophole allowing private equity to inject capital without assuming control of the practice itself.
The agreement valued WSHB at $700 million, the Financial Times reported.
“I know quite a few other MSOs already invested in by private equity in the legal space … but it’s pretty exciting to be the largest out of the gate,” said Daniel Berman, WSHB’s executive chair who co-founded the firm in 1997 on what he said was a “shoestring budget.”
Decades of growth
The team added clients and attorneys at a fast clip, expanding to 35 states with 43 offices nationally and a presence in London. A few years ago, the partners agreed that continuing to scale the firm would mean taking on inorganic growth and leaning into artificial intelligence-driven efficiency, Berman said.
They mulled over their options, including taking on debt, and ultimately went to market in this year’s first quarter to find a private equity partner.
Before long, the partners landed on Charlesbank, which “ticked all the boxes,” Berman said. “They’ve got a great history in investing in accounting firms, in insurance brokerage firms (and) in optometry rollups, where it’s all been about growing through M&A, growing through lateral acquisitions,” he said. “We just really were impressed with their experience, their track record and their philosophy.”
In a press release announcing the deal, Charlesbank, which manages $24 billion in assets, said it has invested in professional services and insurance fields “for years.” In 2024, it made a strategic growth investment in business advisory and accounting firm Aprio.
Three years earlier, it became tech advisory platform Bridgepoint Technologies’ first private equity sponsor.
“We look forward to bringing our depth of thematic research in those spaces, as well as our extensive experience as the first institutional capital partner to founder-led businesses, to support WSHB in its goal of better serving its clients and people,” said David Katz, a managing director and co-head of private equity at Charlesbank, in the release.
Investors trickle in
Private equity has been funding professional services firms through MSOs or similar split models since the 1990s. The strategy, attractive for its predictable fee revenue, started with a focus on the healthcare sector before investors moved into accounting in the last decade. Legal practices – including Century City-based Massumi + Consoli, which nabbed an investment from Dallas-based Trive Capital in September – are the latest target.
For healthcare, accounting, insurance and legal firms, an influx of capital can make a world of difference in gaining market share.
“There’s a lot of theories as to why people take private equity, but in our case, it was truly to service our clients and be the best we could be in our class,” Berman said.
WSHB’s newly established MSO absorbed the firm’s 550-some non-legal staff, including human resources and IT professionals, and will bring on merger-and-acquisition and integration specialists tasked with implementing AI and other technology into the firm’s operations.
Berman said the MSO will help WSHB address the firm’s “biggest problem”: growing client demand that it sometimes struggles to meet.
“This is our opportunity to go from 600 lawyers to 1,200 lawyers over the next several years and have the capital and the resources to do it,” he said. “That excites me as a founder and as somebody who’s invested a lot in the past into the firm to have this opportunity.”
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