A Fresh Look on Legal Strategy for Sponsors and Portfolio Company Owners
By Sean Gallagher, Co-Founder, Breakpoint Strategy
For private equity, venture capital and other sponsors, the management of portfolio company legal resources represents a challenge that extends far beyond traditional cost management. Indeed, for those overseeing diverse portfolio companies, the legal function is not merely a compliance necessity but a strategic lever with implications for value creation and organizational resilience.
The Strategic Inflection Point of Legal Capabilities
As portfolio companies evolve through various stages of growth, the legal function similarly transforms. What begins as an outsourced service with external law firms gradually becomes a more complex strategic consideration. The pivotal question for sponsors is not simply “How much are we spending on legal services?” but rather, “How can our legal capabilities become a competitive advantage?”
Sometimes inadvertently, sponsors can treat legal resources as a one-size-fits-all resource, failing to recognize the dynamic nature of legal needs across different lifecycle stages of its companies. A high-growth technology startup requires fundamentally different legal support compared to a mature services company preparing for a strategic event, such as potential M&A activity or an IPO.
Beyond Cost: The Strategic Calculus of Legal Resourcing
The traditional approach of minimizing legal expenses – while offering instant gratification – largely misses the mark. Effective legal strategy is about optimizing value, not just minimizing expense. This requires a considered approach that analyzes and assesses the strategic alignment of a company’s business objectives with the scalability and talent of the company’s legal function (whether internal or external).
As part of this review, Sponsors must develop an approach to portfolio legal resources that can adapt to the operational risks inherent in any business, such as strategic transactions, complex regulatory environments, cross-border considerations, and strategic shifts driven by the impact of competitors or new technological innovations.
This approach requires moving beyond transactional thinking for legal services (i.e., getting away from the one-sized-fits-all model) to a more holistic, strategic perspective that views legal capabilities as an integral part of organizational design.
A Philosophical Shift: Legal as a Strategic Catalyst
More Sponsors today are reimagining the legal function not as a cost center, but as a strategic resource and catalyst. This means:
- Developing legal talent with broader business acumen
- Creating flexible legal infrastructure
- Investing in predictive legal intelligence
- Aligning legal strategy with broader portfolio objectives
To be clear, this is much more than just an operational adjustment—it’s a philosophical shift in how Sponsors conceptualize legal resources for their portfolio companies. The most successful portfolio management strategies will be those that treat legal capabilities as a dynamic, strategic capability rather than a static administrative function.
About Breakpoint Strategy
Breakpoint Strategy is the premier strategy, recruiting and networking firm for the in-house legal community. Want to chat about how Breakpoint can help you drive efficiency, performance and meet and exceed the needs of this evolving landscape? We’d love the opportunity to learn more about your challenges and opportunities. Learn more about Breakpoint Strategy and start the conversation at www.breakpointstrategy.com.
