Building Professional Services Firms for Growth: Private Equity, Acquisitions and AI

In this episode of The Private Equity Podcast, Alex Rawlings speaks with Zachary Darrow, Chief Executive of Darrow Everett and leader of the firm’s Private Equity and Securities Practice Group.

Zachary shares how Darrow Everett grew from a real estate and finance boutique into a full-service law firm with eight offices across the East Coast. He explains how the firm navigated the global financial crisis, the pandemic, client losses and changing interest rates by diversifying its services and pursuing strategic acquisitions and team lift-outs.

The conversation explores why integration is often the hardest part of professional-services acquisitions and how treating employees as a second group of clients can improve talent attraction, retention and performance.

Zachary also discusses Darrow Everett’s data-led approach to business development, including measuring conference ROI, producing targeted digital content and ensuring marketing activity reaches genuine decision-makers.

Alex and Zachary examine the growing intersection between private equity and legal services. They discuss the regulatory barriers to outside investment in law firms, the potential role of managed service organisations and how private equity could provide the capital and operational expertise required to modernise the sector.

Finally, Zachary explains how Darrow Everett is adopting AI. Current use cases include reviewing large volumes of litigation data, identifying potential omissions in legal documents and improving internal workflows—while maintaining human oversight and professional accountability.

Key Takeaways

• Build professional-services firms as businesses, not simply collections of practitioners.
• Successful acquisitions depend on fast, thoughtful cultural and operational integration.
• Founders should prepare their infrastructure, legal documentation and financial reporting before pursuing investment or an exit.
• Marketing activity should be assessed through measurable returns rather than tradition.
• AI can enhance legal analysis and productivity, but its output must still be checked by experienced professionals.
• Private equity could unlock significant growth within legal services if regulatory and ethical concerns are properly managed.

Timestamps

00:00 – Introduction to Zachary Darrow
01:00 – Building a business that happens to be a law firm
01:31 – Navigating the global financial crisis
02:28 – Diversification, marketing and acquisitions
03:25 – Lessons from team lift-outs and firm acquisitions
04:49 – Acquiring people-centric professional-services businesses
05:12 – Treating employees as a second client group
07:01 – Modernising legal-sector business development
07:58 – Measuring conference and sponsorship ROI
08:55 – Content-led digital marketing
11:48 – Lessons from advising founders and investors
12:01 – Why founders must prepare earlier
13:57 – “Make-ready” work before raising or selling
14:56 – Chief Outsiders
16:22 – Private equity’s opportunity in legal services
17:20 – Alternative business structures and MSOs
18:18 – Solving law firms’ capital constraints
20:17 – AI investment and transformation
21:15 – Darrow Everett’s adoption of legal AI
24:01 – AI use case: reviewing large datasets
25:29 – AI use case: strengthening legal documents
27:24 – Zachary’s recommended reading
28:22 – How to contact Zachary Darrow

Raw Selection partners with Private Equity firms and their portfolio companies to secure exceptional executive talent. We focus on de-risking executive recruitment through meticulous search and selection processes, ensuring top-tier performance and long-term success.

🔗 Connect with Alex Rawlings on LinkedIn https://www.linkedin.com/in/alexrawlings/
🌐 Visit Raw Selection www.raw-selection.com

Transcript

00:00

Welcome back to the Raw Selection Private Equity Podcast. Joining us today is Zachary Darrow, Chief Executive of law firm DarrowEverett and head of the Private Equity Division. Today, Zachary is talking about the firm’s acquisition journey, the growth of the business and how they are adopting artificial intelligence. Zachary, if you could share with us a brief insight into you.

Hey, Alex. Thanks for having me. Yeah, so, I’m Zach Darrow. I’m the...

00:30

CEO of the law firm DarrowEverett. I also lead our Private Equity and Securities Practice Group. I’ve been here for about 20 years. We started the firm about 20 years ago and now have offices all up and down the East Coast—eight of them, to be precise. If there is anything else you want to know about me, let me know. I’m happy to be here.

Absolutely. Talk to us a little bit about the DarrowEverett growth journey and what you have been through. We understand you have made strategic acquisitions, but we are interested to hear about the journey so far.

01:00

Yeah, it has been really interesting. We started the firm on a slightly different premise from most. It became a bit of a tagline: we are a business that happens to be a law firm. We were really focused on the fundamentals of a business. We always heard the jokes about lawyers and doctors being bad businesspeople but amazing at their craft. We approached it the other way by saying, look, we are going to presume we will be good at our primary jobs, but we also want to focus on building a business within the practice of law.

01:31

We got a few good hints along the way and learned some lessons. The firm was founded in January 2007. We started as a real estate and finance boutique. Shortly afterwards, the GFC hit, which was particularly difficult for a firm founded in real estate and finance. There were plenty of crises that we had to pivot and learn from. We came out of that by moving into the realm of full-service law firms...

01:59

so we could better diversify by adding litigation and corporate practices. That started with some acquisitions. Before law school, I worked as an executive at what is now a Fortune 5 company, but was then a Fortune 100 healthcare company, on the business side rather than as a lawyer. Early in my career, I also took a brief step away from law and ran a portfolio company owned by one of the world’s largest hedge funds. Again, my head was in business.

02:28

What do we do when markets change, issues occur or problems arise? We adapt. We diversified as a full-service law firm. We started to think about how businesses grow. We invested heavily in marketing and in learning who was doing what we wanted to do, and then started a steady stream of acquisitions—more acqui-hires and lift-outs than acquisitions of entire law firms in the traditional sense.

02:57

We learned a lot along the way and gained many good colleagues. After the GFC, the next major event was the pandemic. Shortly after that, we lost one of the firm’s largest clients due to bankruptcy and had to pivot again. That was when we adopted a more digital marketing and advertising platform to pursue new clients and opportunities more precisely. Then, shortly afterwards, the interest-rate increases occurred, significantly affecting...

03:25

both corporate and commercial real estate practices. Most notably, we completed a lift-out of eight attorneys and all their support staff at the beginning of 2025. At the end of 2025, we completed an acquisition involving about 25 people. Both gave us a lot of experience in growing through acquisition and...

03:54

expanding our practice areas at the same time. By that point, we had already completed a few transactions, so I think we had become really proficient at the hardest part, which was integration. We have developed a very good process for identifying good colleagues, bringing them in through whatever structure is appropriate and, more importantly, integrating them in a timely manner so that they become comfortable and productive in their practices, and accretive to the firm’s growth and productivity.

04:22

Timing is everything. That has put us into a lot of discussions with people on the private equity side, particularly as private equity and law firm growth have become such prominent topics. That journey has led us to a very interesting point in time, and we are relevant to the discussion, perhaps by happenstance, but nonetheless part of it.

Just focusing on that journey before diving into the connection between...

04:49

professional services, private equity and, obviously, law: coming from running an executive search firm and seeing the good, the bad and the ugly—probably more of the latter—I know that acquisitions in professional services are particularly difficult because of the people-centric nature of what we do. What have been your biggest learning points from the transactions you have experienced?

05:12

Yeah, it is a phenomenal question. It is a human-capital space. I think lessons have been learned along the way, first in medicine, then in accounting and financial services, and now we are seeing them applied in law. The most important lesson that we have learned, at least as an organisation, is that if you approach the business as having two sets of clients, you have the best chance of attracting...

05:40

top talent and retaining top talent. What I mean by two sets of clients is that there are those who pay our bills and for whom we perform services. But the firm must also recognise that it provides a platform from which our colleagues operate. If you invest in that platform and pay as much attention to it as you do to the day-to-day provision of services, I think that is really...

06:05

what differentiates us and creates a lot of opportunities. We are constantly thinking: if Alex were to join DarrowEverett, what resources would we provide to help him do his job, obtain new clients, retain his clients and attract new talent to serve his practice? It is not something that should be done in silos. When the firm commits to it and approaches it as a holistic goal...

06:33

it makes a big difference culturally and in terms of satisfaction. That retains the capital—the human capital. People are happy here and appreciate the environment they have been provided. That then makes them better service providers for their clients.

You also mentioned that, post-COVID, you diversified your marketing strategy. Professional services have typically been...

07:01

very referral-driven: who do you know, what do you know, and the wine-and-dine type of scenario. Finance and accounting in the UK are certainly very much like that. The accounting sector was not even allowed to market itself properly until relatively recently, in general terms. What were you doing before? Was it that? And what are you doing now as part of your new client-acquisition strategy?

07:29

I think the hand-to-hand combat, so to speak—the wining and dining, spending quality time getting to know people and developing honest relationships—was what we did at the beginning, in the middle and now. It still has a very relevant role. Where we have evolved, whether a little bit or a lot, is by taking a business approach to marketing and asking: what is the ROI?

07:58

Conferences are a perfect example. Conferences can be wonderful. They can also be loss leaders—or not even loss leaders, just losses. Who attended these conferences in the past? If we attended, what was our return on participating? We track and assess that analytically and then make a decision about the next conference or the following year. We will look at the previous three years of attendees before deciding to go...

08:26

and certainly before deciding to sponsor. If it is full of business-development people, we typically will not attend. If it is full of marketing people, we typically will not attend. It needs to be a forum filled with decision-makers who can say, “I would like to work with DarrowEverett, and I am selecting them.”

The way we really changed was when the pandemic hit and conferences and traditional networking were reduced to almost nothing. As an organisation...

08:55

we started looking at how we could use content-driven digital marketing and place that content in front of target markets. If you look at our LinkedIn page, for example, I think we are nearing 13,000 followers. You cannot buy followers on LinkedIn in the same way you can on Instagram, so that is an extraordinary number for a firm of our size. We made a conscious effort to ensure that our firm and our members participated...

09:24

and that we produced good content we believed an existing or prospective client would want to read: helpful, informative and bite-sized. We invested in both paid and organic distribution, whether through LinkedIn, JD Supra or Law360. The goal was that if Alex was interested in raising capital or buying the building behind him...

09:50

Alex needed to know that DarrowEverett existed, that DarrowEverett had expertise and experience in the relevant practice areas and subjects, and that we should be at the front of his mind. The traditional marketing you mentioned—the networking and the wining and dining—relies on the same psychological premise: being front of mind. Alex says, “I just had dinner with Zach. He is a nice guy. We need a lease drawn up. Why don’t we give Zach a call?” There are a lot of good lawyers out there, but he thought of Zach because Zach was front of mind.

10:19

Now we also do that through content, so it is very important. During the pandemic, we were putting out more than seven pieces a week. Now we try to publish four or five informative, highly targeted pieces each week so that people are not saying, “Unsubscribe. You have sent me 17 pages of nonsense.” We also try to remain current. Whether it is AI, recent decisions or events happening in the world, we focus on things that are relevant...

10:50

so that we can be an information source, remain front of mind and hopefully be engaged to help people. We discourage some of the more traditional, old-school marketing—for example, attending conferences simply for the sake of attending, or joining networking groups that do not have a good track record of generating business. We are willing to be honest with ourselves and our colleagues and say, “That is not producing.” Similarly, we are not going to spend heavily on Google Ads for...

11:19

the kind of sophisticated legal work that we do. It is probably not the best use of our resources. Again, we take a very business-focused approach. We understand that we need to be dynamic and change with the times. Lastly, we do a lot of internal coaching and idea-sharing. Twice a month, we hold forums where people can discuss what is working, what is not working, and bounce scenarios off colleagues with different experiences and perspectives.

11:48

Talk to us a little bit about the lessons you have learned from advising founders, private equity investors and operators on their transactions and legal requirements.

12:01

We have a lot of experience with founders. I do not know whether that is partly because I am one myself—not all of my colleagues are—but we often find ourselves advising them. One of the things we have learned as a firm is that many founders do not invest enough time upfront to prepare themselves for their ultimate goal. A common founder’s approach is...

12:30

“I am definitely going to do that when I have the resources,” or, “Once we start to gain some momentum.” I am speaking mainly about first-time founders. Usually, they have learned their lesson by the second or third business they found. But the first time around, there is often this idea of, “I will do it when I get big enough.” We try to explain that, yes, it may sound self-serving because we are paid to help with these things, but you are already big enough.

12:58

The problem is that once you reach your own version of “big enough,” it may be too late. You may have a regulatory inquiry that could have been avoided, an audit that could have been avoided, or an opportunity with an unbelievable customer or client that says, “If only you were a little more structured or had invested more in your infrastructure.” We have found that some people know how to build...

13:27

and they build for the future. Others know how to operate, but they do not always build for the future. Those are two very different journeys. We try to encourage people to get ahead of it, talk about their goals and understand where they want to take the business. Are they looking for an exit? Over how many years? In which sectors? Do they want to become a platform or an add-on? We then help them put the tools and foundations in place so they are ready when they get there.

13:57

The other thing we have learned from representing founders is that an ounce of investment in what we call “make-ready” work can be worth many pounds of return. When they feel they want to raise capital, sell the business or take on an investor, they should do the preparatory work first. The best example I can give is working with an accounting firm to conduct a pre-emptive quality-of-earnings review...

14:27

and reviewing their employment practices. If we have done all of that in advance, then yes, they have spent money with the right consultants or professionals, but when they go to market, it gives buyers and investors much more confidence. They receive good answers about why certain things are structured as they are, or they can see that previous issues have already been corrected, reconciled or resolved. Founders are often the least likely to do this work, but if you can encourage them to do it, they benefit the most...

14:56

from what we call make-ready work when they want to raise money or go to market for a sale or investment.

A quick break from the podcast to introduce Chief Outsiders. Chief Outsiders helps private equity firms and their portfolio companies accelerate revenue and increase enterprise value quickly. Its bench of seasoned growth executives are not career consultants; they are strategic operators who have led sales and marketing inside real businesses.

15:25

They embed directly into portfolio companies to drive growth from insight to strategy to execution. When deeper capability is needed, their on-demand execution teams step in to help companies go to market without the delay or long-term cost of full-time hires. Everything they do is supported by proven, market-tested methodology and an AI-native operating system...

15:53

built from more than 2,000 engagements, bringing collective experience to every initiative. Chief Outsiders has partnered with hundreds of private equity firms and more than 500 portfolio companies to drive billions in revenue growth. If you are looking to accelerate value creation across your portfolio, visit chiefoutsiders.com. With Chief Outsiders, growth starts here.

Talk to us about the...

16:22

future intersection of private equity, the legal-services industry and, of course, the AI transformation that is already upon us.

Those are two big subjects. I am going to divide that into private equity and law, and then AI, although you are right that they intersect. One of the first fundamental points to discuss is that, for a long time, as you probably know...

16:52

private equity investment has not been allowed in law firms. Similarly, in many US states, medical practices face corporate-practice-of-medicine restrictions. In most jurisdictions, they work through those issues by using an MSO, or managed service organisation. Accounting firms have gone through a similar evolution. Law is a little further behind and perhaps subject to greater scrutiny, with concerns that...

17:20

using a managed service organisation may not take you all the way there, although I think that, when carefully structured, it certainly can. Arizona, I believe, passed a statute that effectively allowed an alternative business structure permitting outside investment in law firms. I think KPMG may have been among the first to complete a transaction in Arizona under the new framework. That prompted people in other states to say...

17:50

“We do not have Arizona’s legislative framework, but the MSO concept still exists. There must be a way to structure it so that the business is not influencing the decisions lawyers make for their clients any more than if DarrowEverett outsourced its accounting, billing or benefits functions today.” There are business functions that many law firms already outsource. Where that intersects with...

18:18

private equity is that law is one of the largest industries operating under significant capital constraints. There are very few places to go. You either have other lawyers willing to invest if you want to grow or strengthen the balance sheet, or you go to traditional banks, which, as we all know, do not underwrite opportunities in the same way as private equity, particularly from a growth perspective. By way of example...

18:48

there are transactions that many law firms, including ours, might execute that require a relatively modest investment. It may not even reach one times EBITDA for a group of lawyers joining, or perhaps two times, which is still something we have rarely seen. Private equity says, “Wait a second. We are entering other markets at purchase prices of eight, nine or ten times EBITDA or more.”

19:18

“What is going on here? Let us investigate it and take a closer look.” DarrowEverett said almost 20 years ago that we wanted to be a business that happened to be a law firm. That line has an element of truth to it, because private equity firms often bring great expertise in running businesses, creating operational efficiencies, improving purchasing, reducing waste, procuring insurance and...

19:48

so on and so forth. I think private equity looked at it and said, “We have a capital-constrained market and a broader industry that could benefit from our business acumen and the tools we have used to enhance businesses outside the legal industry. Law seems to need that support as much as, or perhaps more than, other sectors.”

Now I will bring your two subjects together. With AI, you have businesses at pivotal transition points...

20:17

that need investment, infrastructure, retooling, re-envisioning and reimagining how services are brought to market. Those are all areas in which private equity has a strong history of thriving. I think private equity sees it as a huge market that will open up as long as the regulatory concerns can be managed. As someone working in the field, I believe it could provide a lot of opportunities for firms to access growth capital...

20:47

and expertise, and to improve the business side of their operations. That would make us better lawyers by allowing us to focus on what we do day to day: serving our clients.

On the AI side, we have spoken about it extensively, as you can imagine, and done a great deal of internal work. We have had an AI subcommittee for more than two years and were one of the earlier adopters...

21:15

among mid-sized firms of Harvey AI. We have vetted multiple products to ensure that we continue using the tools that best serve our colleagues and clients. On the back end, we have worked with Claude Enterprise to make our business processes better and more efficient. We are also working with other tools for time capture, billing and other functions within the practice of law. It is here. It is real. It is no longer a question of if. From the...

21:45

legal-service delivery side, however, it still has some way to go. It is a tool. It enhances what we do, makes us better and helps us become more efficient, but it cannot be relied upon without review. It cannot produce work that you simply send out. Even the assessment I have just given you is changing day by day as the technology improves and the way it works is modified and, hopefully, enhanced.

22:13

I think the overall outlook is that an attorney will ultimately be able to do more. There also needs to be a focus on training younger attorneys. What makes a senior attorney great is not simply comparing one person’s work product with another’s. It is what we bring to the equation: the intangibles, analysis beyond the case law and the ability to understand the wider situation.

22:43

Alex may be right and Zach may be wrong, but the conclusion may still lie somewhere in the middle because of other factors that AI may not identify, at least in its current versions. AI is here and it is real. We are focusing on how we train newer lawyers and how it can enhance the efficiency and productivity of an individual attorney, while remaining very responsible in our use and rollout of new products because they are...

23:11

moving at a pace we have never seen before. When I was in law school, we used a computer lab because our home computers were not powerful enough to access Lexis and Westlaw. Consider all of the technological evolution since then. DarrowEverett has always been relatively tech-forward—not to the point where we tried to be the coolest or have the most cutting-edge technology, because sometimes it was not ready—but we always made sure that we kept pace with our competitors and with Big Law. That was important to us.

23:41

I think AI will remain a major subject of discussion for many years to come. As I said, even the assessment I have given today may change next week, next month and certainly next year. As a firm, we need to stay on top of it every day.

What are one or two use cases for which you are currently using AI within the firm?

24:01

We use it in a lot of areas, but two common examples come to mind. The first is the initial digestion of large amounts of data. If it is a litigation matter, for example, we may receive a massive discovery dump. We cannot rely solely on AI’s assessment or output, but it helps us get a sense of what we have in front of us.

24:29

If you receive 50,000 documents, you create parameters and guidelines, set up what is called a vault, and then begin asking questions, requesting assessments and extracting data from that large universe of information. We still have one of our colleagues—an associate or someone else—verify anything important. Over time, depending on the needs and demands of the case, we may go back and review everything to ensure nothing has been missed. But going into an assignment...

24:59

or beginning a review or analysis with that preliminary understanding is amazing. It creates a real advantage. You can move through the data more efficiently. Think of it as the difference between walking into a room with the lights off and walking into it with the lights on. I am less likely to trip over something because I can see what is in front of me. AI shines some light on the subject.

The other area where we use it a lot is quality control. Let us say you put together a great document, send it to me and I review it using my own experience.

25:29

I say, “Okay, great. This is ready for the client.” The client pays no more than they would on an ordinary day. In a matter of minutes, however, I can also use the tool. I write a few sentences framing the subject: what we are doing, who I represent and what the issue is. I then ask, “What do you think? What might I have missed, given who I represent, our position in the negotiation and where we are in the transaction?” The AI then gives me some feedback, even though I am already an experienced lawyer.

25:59

Let us say it gives me ten things to consider. I may dismiss four because they are not relevant to the nuances of the matter. Two may be interesting but not something I want to pursue. Then there may be a few other points that make me think, “You know what? I can make this even better.” The additional time charged to the client is de minimis, but they receive the benefit of what is almost like a third participant reviewing the work.

26:25

In some respects, AI is imperfect because it is not a living, breathing person involved in that particular negotiation. It does not fully understand the nuances or why certain imperfect things may still need to remain. But it is also very powerful from the perspective of its analytical capabilities across the raw data it has available. We use it as a strong checking tool to ensure there is nothing that human...

26:54

error may have overlooked, while still using all the benefits of human judgement to make sure we do not act on something that is inappropriate for the circumstances. The same applies to using it to turn the lights on when we receive massive amounts of data. Others in the firm use it in more complex ways, including creating workflows across different groups of data. But those are the two basic functions that have become part of our day-to-day work.

What do you read, watch or listen to...

27:24

that you would recommend others check out?

Well, people should certainly watch The Private Equity Podcast and continue following the show. I am a bit of a nerd in that I try to stay current on everything happening in my industry. I read constantly—countless articles each day covering private equity, M&A, the legal industry, MSOs...

27:54

and private investment in law firms. I am probably a little boring in that respect. Every quarter or so, I reread the same book: Execution: The Discipline of Getting Things Done. It is the kind of book that makes you finish it and think, “I am going to conquer the world. I am going to build something amazing.” The only thing standing between you and the goal is executing on it. That is something I return to often.

28:22

Beyond that, once I put down the articles and get the legal work out the door for the client, you will find me on a paddleboard. That is where I spend my time outside the practice.

If anybody would like to contact you after the podcast, what is the best way to reach you?

They are welcome to email me at zdarrow@darroweverett.com. That is Z-D-A-R-R-O-W at D-A-R-R-O-W-E-V-E-R-E-T-T dot com.

28:50

Alternatively, they can Google the firm, visit our website and find their way to my contact details.

Thank you very much for joining us on The Private Equity Podcast, Zachary.

Thanks for having me, and thank you for creating this forum. It is phenomenal and a genuinely valuable outlet for the industry, so I am grateful to you as well.

My pleasure. Thank you to everyone for tuning in to The Private Equity Podcast. Until next time, keep smashing it.