The City's top law firms are poised to revolutionise their financial structures by embracing corporate models, a radical shift driven by the need for hefty investments in artificial intelligence (AI). As the cost of adopting cutting-edge AI technologies continues to soar, leading players are reluctantly ditching their traditional limited liability partnership (LLP) model in favour of more flexible and capital-rich alternatives. This seismic change is aimed at securing crucial funding to stay ahead in a fiercely competitive sector.
According to Burford Capital, the move towards external capital is gaining momentum, with top-tier City firms actively seeking partnerships to fuel their AI ambitions. Travis Lenkner, Chief Operating Officer at Burford, stressed that this shift is necessary for firms to remain relevant, describing AI investment as a "non-negotiable". The 2025 investment boom in the legal tech sector saw £188.8 million poured into new technologies, with a significant chunk going towards AI solutions from providers like Harvey AI and Legora AI. Some major players, such as Kirkland & Ellis, are already committing substantial sums to develop proprietary AI platforms, with reports indicating a $500 million allocation.
The traditional LLP model is hindering long-term strategic investments, as funds for initiatives often come from the firm's profit pool, leading to slower decision-making. Older partners nearing retirement may not see direct benefits from future-focused expenditures, resulting in less agility compared to traditional corporate entities.
While discussions around private equity have circulated within the sector, top City firms are reportedly not pursuing buyouts but instead seeking "strategic minority investments" from capital providers whose goals align with their vision. Burford Capital, which made a minority investment in London-based Kindleworth last September, is positioning itself as such a partner for major firms, including those in the 'magic' and 'silver circle'.
Despite the recognised need for external funding, there's a noted reluctance among leading firms to be the first to implement such deals. Patrick Savage, Vice President at Burford Capital, indicated that firms are keen to understand the exact purpose of the investment to avoid an endless cycle of AI spending. Both Lenkner and Savage suggest that once an initial major firm makes the leap, a cascade of similar deals is expected, with many firms expressing interest in being the "second" to adopt these new funding structures.
Historically, the legal sector has relied on bank debt for investments and shown caution towards public markets. A wave of law firms listed on the London Stock Exchange in the late 2010s ultimately faltered, with several delisting or facing significant challenges – a cautionary tale for those considering going down the corporate route.