When the client backs your competitor

What happens when Big Law’s biggest clients stop merely funding their law firms’ profits and start directing work to challengers in whose success they share?

This month, Norm Law announced it had advised Blackstone on its participation in a $700 million financing round for the AI chip company Etched. The same day, it announced it had represented Coatue in a $100 million financing for Cadence Solutions, a clinical AI company.

Both clients are investors in Norm Ai, the technology business behind Norm Law. The only two others the firm named when Bloomberg Law asked recently, Bain Capital and Khosla Ventures, are also investors. Four clients named, four investors. Norm Ai’s wider backer list runs well beyond them, including Citi, Vanguard, TIAA and New York Life, which uses the compliance platform it part owns.

This is less about whether an AI-native firm can take meaningful market share from Big Law, and more about whether major buyers have started to treat legal spend as something they can own a piece of.

Blackstone and Coatue do not own Norm Law, a distinction that matters more in the US than the UK, but the commercial alignment is close. When Blackstone put a further $50 million in Norm Ai last November, the announcement said the two would collaborate to develop Norm Law services, “for Blackstone’s use.”

This is something close to an economic captive. The client provides the capital, shapes the product and technology, supplies the early demand, and shares in any rise in the company’s value.

Blackstone disclosed paying Kirkland & Ellis $87.8 million in 2025 and $101.3 million the year before. That’s visible only because a Kirkland partner sits on its board, and it covers only Blackstone and its subsidiaries. What Kirkland bills Blackstone’s funds and their portfolio companies goes on top.

Against recurring legal spend on that scale, $50 million is a modest bet with two potential wins. Lower fees. And the appreciation of a business whose value rises as it absorbs more of the work.

Where the volume is

The Etched and Cadence mandates are direct investment work, and Khosla says it uses Norm Law for fund formations and venture closings. The volume sits in the portfolio.

An acquisition is just the start of a portfolio company’s legal spend. Across the hold period, there are add-on acquisitions, debt financings, refinancings, commercial contracts, employment and incentives work, compliance, IP, tax, disputes and an exit. Little of it is “bet the company”. It is repeatable, document-heavy, lucrative, and spread across hundreds of companies.

A Norm-type platform can aggregate it. One provider across the portfolio, standardised playbooks, pooled purchasing power, and institutional knowledge that compounds with each mandate. Cost is only part of it. Visibility and control may matter as much.

Alternatives to Big Law already serve this work. Nelson Mullins markets outside general counsel services for PE-backed companies at what it says is “a fraction of the cost of Am Law 50 firms”. The AI-native provider’s first challenge is to beat Nelson Mullins, not Kirkland.

Which is why the first firms disrupted may not be the elite law firms doing the acquisition or the most complex financings, but rather the mid-sized firms and boutiques that pick up the work afterwards, either directly or by referral. Norm Law says as much. Its chairman, Mike Schmidtberger, formerly of Sidley Austin, describes the target as work with “a substantial dislocation between the cost of the work and the value the client ascribes to it”.

A prototype, not an exception

Clients have tried to build alternative supply before: captive panels, managed services, the Big Four. They mostly stalled on conflicts, quality risk and inertia. What has changed is that the cost of doing the work is falling quickly enough to make owning the supplier worthwhile, and capital is willing to fund it.

Insurance never stopped. When the 2013 referral fee ban in the UK wiped out the £18.6 million Admiral earned from sending customers to injury lawyers, the insurer had its own licensed law firms trading within a month. Direct Line built one too, which passed to Aviva last year. Buyers owning captive law firms is not a private equity invention.

The components are available to others: abundant private capital, clients with recurring demand, experienced lawyers willing to leave established firms and AI capable of systematising a growing range of work. Like a kaleidoscope, the same pieces can form many different structures.

A client might back an affiliated technology company, as Blackstone has done. A technology platform might acquire or set up a regulated legal practice. Several clients could support a shared provider. An established law firm could even place selected services in a separately capitalised platform rather than attempt to finance everything from annual partner profits.

Software company Carta has bought Avantia, an AI-driven firm licensed in England as an alternative business structure, and relaunched it as Carta Law. A supplier integrating forwards rather than a client integrating backwards, but it ends up in the same place. Crosby has raised $86 million, including from Cooley. Fenwick has backed Norm Ai. Am Law firms are buying shares in their own potential competitors.

The limits of alignment

Four named clients, all of them investors, is validation of a sort, but not evidence that Norm Law can win consistently in the open market.

Nor is pricing between an investor client and a law firm provider it backs proof of sustainable economics. The client wants lower fees, and the shareholder wants the business to grow. Until unrelated clients buy at arm’s length, it’s hard to know where genuine efficiency ends and strategic subsidy begins.

There are other tensions. The system improves the more work clients feed it, and the clients least likely to feed it are rival sponsors. A platform funded by its own customers may find its addressable market is its own shareholder register.

A captive grows differently too. Its lawyers do not have to hunt for the next mandate, and hunting is part of what keeps a firm sharp. Nor does a directed relationship stay fresh. A client told to use one provider still notices what the market offers elsewhere: the secondments, the attention, the ordinary business of being courted.

Extending the model across a portfolio creates governance friction. A sponsor may recommend a provider; requiring a company to use a business in which the sponsor holds an economic interest is another matter. Portfolio boards owe duties to their own companies.

The conduct questions are not box-ticking. What happens to privilege when a sponsor and portfolio company sit on the same platform? Who does the firm act for when an add-on becomes a dispute, or a portfolio company a workout? Does one client’s data train the model the next client uses? Other clients may hesitate to instruct a firm seen as belonging to a handful of sponsors, though equity in a growing business is something no partnership can offer.

None of this means Big Law is doomed. The leading firms still have the relationships, judgment and reach required for the hardest matters. They too are investing in technology and can use AI to defend work that might otherwise leave.

But the threat does not require wholesale client loss. Big Law can keep the crown jewels and still lose part of the economics beneath them. Mid-sized providers will feel it first. Elite firms may feel it later, as less routine work, fewer training opportunities, and less control over the client’s ecosystem.

Norm Law may or may not succeed. What matters is whether it is a prototype that Blackstone’s peers can copy. For decades the largest buyers of legal services, PE sponsors above all, financed extraordinary partnership profits and shared in none of them.

If they can finance alternative providers, direct suitable work towards them, and capture some of the value created, buying legal services begins to look like an investment strategy.

When the client backs your competitor, the relationship may remain secure; the revenue may not.

David Morley is co-founder of strategic advisory firm Dejonghe & Morley LLP. He was previously head of Europe at Caisse de dépôt et placement du Québec and managing and senior partner at legacy firm Allen & Overy.

David also writes a monthly newsletter for law firm leaders called Equity Partner.