Our report examines and analyses UK merger and acquisition (M&A) activity across the legal sector during 2024, while also providing an outlook and early indications for 2025.
Our review has showed considerable activity, with total transaction volume increasing by 25% in comparison to 2023. Acquisitions of lower to mid-market law firms continued to dominate M&A activity, particularly in respect of trade buyers looking for strategic acquisitions in order to expand geographically, enhance service line offerings or capitalise on the benefits of scale. There was also continued interest from private equity in the legal sector, amid a continued focus on the wider professional services sector (dominated at present by deals in the accountancy sector).
Key trends
The UK legal sector grew in 2024, with median UK legal fee income per fee earner having increased for the 14th consecutive year in (10% growth in 2024, vs 8% in 2023) with fee income growth surpassing the wider UK professional services market.
Research has found that 36% of UK law firms now utilise AI for document drafting and automation, whilst 29% use it for contract review and analysis and 20% use it for e-discovery. Notably, 43% of UK law firms report that AI has boosted work quality and productivity, while over 20% say it has positively impacted mental wellbeing and work-life balance. The implementation of AI can be prohibitively expensive for smaller firms, which is cited as a key driver of consolidation at the lower end of the market.
Transactions
A total of 99 transactions involving UK law firms completed in 2024, a 25% increase on the 80 deals completed 2023.
Monthly deal volumes peaked in October 2024, with vendors anticipating changes to capital gains tax rates during the 2024 Autumn Budget. This trend mirrored the wider UK M&A market, whereby the number of transactions completed in the month of October 2024 was roughly double in comparison to the average for the prior 12-month period.
2025 outlook
There are positive signs that M&A activity in the legal sector will continue to increase in 2025. City giant Herbert Smith Freehills is set to merge with New York based Kramer Levin – the combined group would have 640 partners.
There also appears to have been an uptick in interest from consolidators, both PE-backed and non-PE backed, in what remains a highly fragmented UK legal sector. Any further decreases in central bank interest rates across the year may also increase appetite for debt-backed acquisition activity in the sector across 2025.
For any queries on how we could help your business, please get in touch with Niraj Patel, Head of Corporate Finance, or Jamie Lane, Head of our Professional Practices Group.
