Freshfields: AI Spin-Off Plans Could Create Billion-Dollar Legal Tech Firm

• Freshfields is considering spinning off its internal AI and legal tech division, Freshfields Lab, into a standalone company.
• Leaked emails from global managing partner Alan Mason revealed plans for a multibillion-dollar valuation and attracting outside investment.
• Freshfields Lab develops legal tech tools for document analysis and due diligence for the firm's lawyers and clients.
• Other major law firms like Allen Overy and Kirkland & Ellis are also making significant investments in AI development and partnerships.
• The move reflects a broader industry trend towards commercializing legal AI and challenging traditional law firm business models.

The strategic consideration to externalize Freshfields Lab, aiming for its "Freshfields Lab commercialization," represents a notable shift from an in-house support function to a potentially market-leading legal tech provider.

Freshfields Bruckhaus Deringer, a prominent global law firm, is reportedly exploring a significant strategic move: the potential spin-off of its internal artificial intelligence and legal technology division into an independent commercial entity. This ambitious undertaking, which could see the new company valued in the billions, came to light through an inadvertently circulated internal email exchange. The firm's global managing partner, Alan Mason, initiated discussions regarding the carve-out of the legal tech arm in an email sent last Friday to Ethan Klingsberg, who co-leads the firm's US corporate and M&A practice.

The confidential dialogue between Mason and Klingsberg centered on strategies for attracting external investment and the prospect of achieving a multi-billion-dollar valuation for the new venture. However, these sensitive plans were unexpectedly disseminated more broadly across the firm over the weekend. Mason's forwarding of the email chain to a large internal distribution list, identified as "$Freshfields All," led to its wider exposure. Despite a swift recall attempt, several recipients had already captured screenshots of the communication, leading to its eventual reporting by the Financial Times. The exchange further revealed that Mason had already engaged with two Wall Street banks concerning the proposal, while Klingsberg expressed confidence that the business could indeed be "worth billions."

The core of these Freshfields AI spin-off plans lies with Freshfields Lab, the firm's dedicated unit responsible for developing advanced legal technology tools. This internal division currently serves Freshfields' lawyers and clients by creating solutions that span critical areas such as document analysis and due diligence processes. The strategic consideration to externalize Freshfields Lab, aiming for its "Freshfields Lab commercialization," represents a notable shift from an in-house support function to a potentially market-leading legal tech provider.

Discussions within the leaked emails drew parallels to successful independent legal AI companies, specifically mentioning Harvey and Legora. Harvey, for instance, is valued at an impressive $15.5 billion and serves over 1,000 customers, while Legora holds a valuation of $5.6 billion with a similar customer base. A key distinction highlighted is that these companies operate as independent, tech-first businesses, unlike Freshfields Lab's current integration within the law firm structure. This comparison underscores the substantial market potential envisioned for a law firm legal tech spin-off from Freshfields.

The exploration of a Freshfields AI spin-off is not an isolated incident but rather indicative of a broader trend of legal AI investment law firms are making across the industry. Major legal players are increasingly recognizing the lucrative opportunities within the artificial intelligence market. For example, the legacy firm Allen Overy collaborated with Harvey and Microsoft to develop ContractMatrix, an AI-powered tool designed for contract analysis. Following its merger, AO Shearman has also announced intentions to deploy agentic AI agents, again in partnership with Harvey, to address complex legal tasks.

Another significant player, Kirkland & Ellis, has committed a substantial $500 million to the development of its proprietary AI tools. This investment includes a platform engineered to seamlessly switch between various underlying AI models without requiring a complete rebuild, thereby ensuring the US legal giant is not reliant on a single AI provider. Freshfields itself has already made strategic moves in this space, having entered a multi-year partnership with Anthropic earlier this year to roll out its Claude AI across all 33 of its global offices, demonstrating a comprehensive Freshfields artificial intelligence strategy even before the spin-off discussions.

Beyond internal development and potential spin-offs, some legal industry leaders are actively pursuing more radical transformations of the traditional law firm business model. A notable example is the former global senior partner of Allen Overy, Wim Dejonghe, who recently co-founded an AI-powered law firm. This new venture specifically targets the review of commercial contracts, with an explicit aim to challenge the conventional billable hour model. Private capital lawyer Victoria Sigeti is the UK Managing Partner at Freshfields, having been appointed to the role in May 2026.

This broader context of innovation, from significant legal AI investment law firms to the emergence of entirely new AI-driven legal service providers, underscores a period of profound change within the legal sector. The potential Freshfields Lab commercialization through a spin-off represents a strategic move by a major firm to not only leverage its internal technological advancements but also to potentially redefine its market presence and revenue streams in the evolving landscape of legal technology.

This development signals a potential shift in the legal services market where major law firms may increasingly externalize and commercialize their proprietary legal AI tools. Lawyers and compliance officers should monitor this trend as it could lead to new legal tech offerings, impact service delivery models, and raise novel questions regarding data governance and client confidentiality when engaging with such spin-off entities.

Source: Original reporting via Legal Cheek and Financial Times