Most leading law firms are discussing the potential for external investment ahead of the Legal Services Act coming fully into force – but they are not admitting to it, according to a financial advisory group.

Few of the larger firms have shown any public interest in raising external capital once alternative business structures are permitted under the legal services reforms.

But advisory firm Europa Partners, which has had discussions with a number of top-30 law practices, says there is much activity going on behind the scenes.

Europa partner Robert Colthorpe said: ‘The public presentation is that this is very interesting, but a long way away. But the private picture is more nuanced than that.

‘This is not a sector that is used to taking advice from investment banks or raising external capital, but that is starting to change.

'It won’t be overnight, but they are looking at ways to make changes.’

Those new approaches could include seeking private equity investment, replacing the partnership model with a corporate management structure and becoming a public limited company.

Colthorpe said the key for outward-looking firms is to ensure staff are behind the transition.

He added: ‘You don’t want 300 partners wondering what’s going on. Burying your head in the sand and wishing the world won’t change is tempting, but it’s not smart.’