The art of legal spend management: strategies for success

Hiring legal teams in private equity is no longer just about filling a compliance gap – it’s about embedding commercial discipline and strategic value at every stage of the investment lifecycle. This was a central theme at a recent co-hosted event with Melius, where legal spend management was dissected not only as a cost centre but as a lever for protecting value, accelerating growth, and enhancing exit readiness.

While many of the insights shared weren’t PE-specific, the lessons are directly applicable to the private equity and portfolio company landscape.

Legal spend maturity: where are you on the curve?

Legal operations typically evolve through five stages of maturity. Understanding where each portfolio company sits on this curve helps PE sponsors assess operational readiness and identify opportunities to drive efficiency and strategic alignment:

• Basic – No formal budgeting or resource allocation; legal is reactive and untracked
• Developmental – Basic budgeting with informal decisions; spend is loosely managed
• Standard – Strategic allocation between internal and external resources begins
• Advanced – Spend is data-driven; vendor relationships are proactively managed for value
• Optimised – AI-powered, predictive spend management with real-time dashboards and strategic investment planning

As one attendee observed, not every team needs to aim for the highest level of maturity: “Optimisation isn’t always the goal. Sometimes, developmental or standard is the right fit for your team’s size and expertise.” Most PortCos sit between developmental and standard. The commercial opportunity lies in moving toward advanced and optimised, where legal spend is actively managed to support business outcomes.

Commercial takeaways for PE and PortCo leaders

To shift legal from a cost centre to a strategic enabler, PE sponsors should focus on four key areas:

Justify cost with commercial impact

GC compensation in PE is often among the highest in the business, making it essential to demonstrate value through clear metrics: risk avoided, deals accelerated, disputes resolved and future liabilities mitigated. As one GC put it, “Legal salaries are significant, so it’s crucial to show how that investment translates into tangible business outcomes.”

Measure what matters

Traditional KPIs rarely capture legal’s strategic influence. The workshop highlighted the need for metrics that reflect both operational and financial value:

• % of time spent on business-critical legal issues
• Internal advocacy and stakeholder engagement
• Estimated cost of risk avoided or mitigated
• Controls implemented to future-proof the business

A participant emphasised, “Metrics should be tailored to your business. If something isn’t working, adapt and refine your approach; legal operations should be agile enough to evolve with the needs of the company.”

Rationalise vendor relationships

Fewer, deeper relationships with external counsel drive better pricing, consistency, and strategic alignment. Controls around who can engage vendors and under what conditions are essential. As one legal leader noted, “Strong relationships with a select group of firms ensure you’re a priority client, which can translate into better service and value. It’s not about having the biggest panel, but about having the right partners.”

Forecast and plan legal workloads

Mapping out expected legal activity over the next three to six months allows resources and budgets to be aligned to business priorities, avoiding reactive spend spikes. “Planning ahead and sharing your pipeline with external firms helps them understand your needs and propose tailored solutions, rather than reacting to last-minute requests,” said one attendee.

Operationalising legal spend management

Embedding commercial discipline across the portfolio requires practical steps:

• Implement spend controls: Define clear engagement protocols for external counsel. “Educating the business on the cost implications of engaging law firms, even for a quick call, can help manage spend and avoid surprises”
• Use dashboards and analytics: Real-time visibility into spend enables smarter decisions. “Dashboards are useful, but only if they track what matters to leadership. Focus on meaningful data, not just volume”
• Quantify risk avoidance: Estimate worst-case scenarios and demonstrate how legal interventions have protected enterprise value. “Tracking issues like disputes or compliance breaches, and showing how legal action has mitigated risk, helps future-proof the business”
• Align legal with exit strategy: Ensure legal operations are structured to support due diligence, compliance, and deal execution

The evolving role of legal teams

Hiring in-house legal talent is no longer just about technical expertise – it’s about commercial alignment, risk mitigation and value creation. For PE funds, embedding this mindset across portfolio companies can unlock hidden value, reduce friction at exit, and drive stronger investment outcomes.

As one participant reflected, “When legal teams have the right tools and frameworks, they become strategic enablers of growth and resilience – not just advisors.”