As private equity firms grow, broaden the scope of their investments and encounter more litigation, a rising number of them are hiring general counsel.

Kohlberg Kravis Roberts & Co (KKR), one of the biggest private equity firms in the world, and GTCR Golder Rauner, one of the largest in Chicago, are both seeking first-time general counsel, according to people familiar with the executive searches. KKR and GTCR declined to comment.

Many of the largest firms have recruited general counsel in the past two years and mid-sized players are starting to do the same. As the dollar amounts under management and the complexity of investments climb, there are strategic advantages to having in-house legal acumen, the firms say. A general counsel benefits those seeking to go public, like KKR, as well as those facing potential litigation.

"Their most precious commodity is the time their investment professionals have to focus on investment activities and to the extent they're focusing on legal issues, they're wasting that time," said Mark Tresnowski, a former Kirkland & Ellis attorney who became general counsel at Chicago buy-out leader Madison Dearborn Partners in 2005. "We take over a lot of the tasks that they used to do."

Tresnowski's work involves advancing the firm's investment strategies, in addition to overseeing legal compliance and managing outside law firms, he said. For instance, Tresnowski participated in negotiating and structuring the firm's acquisitions this year of Nuveen Investments and computer company CDW Corp.

As an in-house lawyer, Tresnowski can make judgment calls he could not as an outside attorney, he said.

"It's very hard for a lawyer at a law firm to perform that role," Tresnowski said. "If you don't work in the firm, you can't really make decisions."

Gaining momentum

As the advantages of having general counsel become apparent, private equity firms are stepping up the pace of hiring general counsel. So many have come on board that attorneys in the industry are considering forming an association, Tresnowski said.

"Most of the major private equity funds either have a general counsel or are looking for one right now," said Brian Davis, a legal recruiter at Major Lindsey & Africa in New York who is working on searches for three firms.

Private equity firms generally start considering a general counsel when they have more than $1bn (£500m) under management, Davis said. Capital raised by the buy-out firms jumped 32% to $102bn (£51bn) last year, up from $77bn (£38.5bn) in 2000, according to data from Thomson Financial and the National Venture Capital Association.

"It has totally to do with the scale of their businesses," said Kevin Evanich, a senior private equity partner at Chicago-based Kirkland. "With that broad product mix, they need strong in-house staffs."

He added that having an in-house attorney tracking the firm's legal experience and advancing strategies in subsequent deals can be a major help.

More litigation

The industry is also becoming more litigious, said Colin Blaydon, a professor at the Tuck School of Business at Dartmouth College and director of the school's Center for Private Equity and Entrepreneurship. People in the industry formerly solved disputes around a table and wrote a few checks, but now they are more likely to file lawsuits and go to trial, said Blaydon, who acts as an expert witness in such cases.

Recently, private equity firm Thomas H Lee Partners sued Mayer Brown over losses tied to the collapse of the law firm's client, broker Refco.

While many private equity firms in the past preferred to pass the expense of outside lawyers to their customers, they are starting to see the benefit now of taking on the staff cost, especially given rising law firm rates.

Private equity firms are a "huge consumer of legal services" and most consider whether to bring lawyers in-house, said Robert Friedman, chief legal officer at Blackstone, which went public in June and has about $88bn (£44bn) under management.

"The increasing complexity of our business and the increasing velocity of our business" is leading more to conclude they need an in-house attorney, said Friedman, who took his post in 2003.

This article originally appeared in The National Law Journal, a US sister title of Legal Week.