Choosing the right legal partner means more than ensuring they have the needed experience. It’s also important to assess their personality and professionalism.

Experience

The experience of the team is vital for any legal firm. A team with a deep understanding of the legal aspects of private equity is essential to guide the client. A team that has worked in the industry for many years can assist the firm with several challenges, including establishing entities in multiple jurisdictions. Establishing an entity can vary from country to country, taking a few hours to six months.

Eaddy says the path to partnership has changed a bit in the past decade, with firms in major markets offering partnership consideration to associates who do exceptional work and make themselves assets to clients. He adds that the ability to communicate effectively with clients and to establish trust are also important factors.

He explains that most partners today are looking for lawyers who understand law firm economics and have a knack for business development. Personality is also an important factor, as is a talent for “selling” oneself to partners.

He adds that a strong sense of ethics and an appreciation for teamwork are other important attributes. In addition, knowledge of various practice areas and a willingness to be flexible as circumstances change are critical for a partner in the legal industry.

Flexibility

The best law firms for private equity are flexible, adapting to the needs of their clients as circumstances change. They know that unforeseen challenges can arise in any business, from the COVID-19 pandemic to a global economic slowdown. CEOs can testify to the importance of a legal partner who can roll up their sleeves and help them find solutions to these unexpected obstacles.

For example, when a VC firm acquires a company, they will often structure the deal to allow the founder or team to retain a large portion of their equity, reducing their overall dilution in exchange for a higher stake in the company at the time of sale. This flexibility can prove invaluable if a company’s valuation declines during a recession or when market conditions erode the company’s prospects.

A robust private equity practice should be able to advise on all aspects of the PE life-cycle, from fund formation and acquisitions through to restructuring and disposition. 

Culture

When a private equity firm invests in a business, it’s looking to maximize its return by building value over the long term. That requires a firm that shares the same values and commitment to success as the investor. A strong culture is a must.

Culture has become more of an issue for PE firms after high-profile debacles resulting from cultural toxicities and leadership miscues. This is one reason why LPs often insist that the management team of their investments have a good track record.

In the past, a lawyer’s culture was mostly determined by the law firm’s hierarchy. It was virtually unheard of for a partner who grabbed the proverbial brass ring to leave their firm for another. Those partners often train the next generation and pass on the culture, clients, and values.

Today, the world of legal work is changing rapidly. A new generation of lawyers is demanding more from the firms they choose to join, particularly regarding gender, race, and diversity issues. Moreover, they’re more likely to move on from a firm whose culture doesn’t align with their values. That’s why every partner must be a fit. Firms that fail to recognize and promote the value of diverse cultures risk losing valuable partners.

Value

All partners pay their dues on the path to equity partnership. The small things often help new attorneys clear the final hurdles: maintaining a balance of billable hours with quality work, being active in client development or building relationships with existing clients, keeping supervising partners abreast of their activities, addressing conflicts as they arise, etc. However, women and attorneys of color need mentors and advocates to help them navigate the partnership process.

In addition, if a law firm’s partner-shareholder structure is based on profit-sharing, it can negatively affect non-attorney staff and clients. If their paychecks are tied to achieving firm goals, they could be demotivated by the pressure to meet performance standards. They may need to be more focused on competition or bogged down in office politics.

Finally, private equity firms typically hold investments for an extended period — up to 10 years or more — and expect to sell them for a profit. In order to ensure that they’re generating a return, it’s important for them to find a company positioned to grow in the marketplace and likely to be resilient in times of change.

When choosing a funding partner, CEOs should ask about the firm’s track record with similar-sized companies and the structure of its deal team. The right partner can open doors and take a company further than it thought possible, while the wrong one could jeopardize its future.