Charlesbank invests in services arm of 550-attorney WSHB

Charlesbank Capital Partners has invested in WSHB Support Services, the management services company that runs the non-legal side of Wood Smith Henning & Berman, a Los Angeles trial firm with more than 550 attorneys. PE Professional reported the investment on Oct. 22; the report gives no amount.

The investment goes into the services company, not the law firm. WSHB stays independent: lawyers keep ownership of the practice and control of the legal work. The firm continues under its management committee—Daniel Berman, Stephen Henning, Kevin Smith and firmwide managing partner Stewart Reid—and all four sit on the MSO's board. Berman, WSHB's executive chairman, becomes the MSO's chief executive. The services company supplies technology, finance, human resources, marketing and other services under a long-term agreement.

For an allocator whose PE sleeve holds business-services or professional-services funds, the diligence object shifts from the law firm to the contract beside it. The equity is a contractual claim on a services agreement with a law firm. That puts the agreement's length, pricing and termination terms on the question list, along with a board whose four firm-side members are also WSHB's leadership.

Professional conduct rules in nearly every state prohibit nonlawyers from owning law firms or sharing in legal fees. The MSO is the structure that gets around it: investors own a separate company providing services under a long-term agreement, and lawyers keep the practice. The sponsor's economics come from the services company, which suggests the underwriting case rests on the agreement's terms.