Private equity-backed law firms have outpaced the growth rate of the UK’s largest law firms over the past two years, according to new research from Hazlewoods.

Since 2022, private equity-backed firms have increased their revenue by 30%, double the 15% achieved by the UK’s top 50 firms, Hazlewoods' data shows. The 12 PE-backed firms included in the study grew their revenue to £780m, whereas the top 50 firms increased revenue to £24.2bn.

Hazlewoods claims that this shows the strategy of private equity firms to consolidate in the legal sector is delivering positive results. It says that private equity buyers have been attracted to the legal sector’s investment potential due to steady revenue streams and a fragmented legal landscape of smaller firms that enables them to pursue a ‘buy and build’ strategy to create larger law firms.

The latest such deal took place last week when North West firm Farleys, which is part of the private equity-backed Lawfront group, acquired Wigan-based law firm Alker Ball Healds Solicitors, its second acquisition since it joined Lawfront in October 2022.

Lawfront, which is backed by private equity house Blixt, operates five sets of regional firms.

Andy Harris, a partner at Hazlewoods, said: “Not every PE investment in law is going to work out but at the moment PE firms are delivering faster growth than the very biggest and most competitive firms in the UK. Rather than seeking to disrupt the industry, PE is by-and-large taking a careful approach of adding and integrating bolt-on acquisitions only after careful due diligence.”

This strategy of merging smaller firms can help extend their service offering and geographical reach, making it easier for them to attract larger clients, Hazlewoods says. This approach can allow them to deliver economies of scale by reducing back-office costs, Hazlewoods says.

The advance of AI and the need for large investments to finance those outlays can make PE funding more appealing for firms. In the past, law firms would have needed to fund capital investment mainly through retained earnings, Hazlewoods argues.

PE funding can also provide law firm founders with a potential exit strategy.

Harris added: “Because of the number of deals that these PE-backed firms are doing, they could become the more favoured bidders for firms looking for bigger partners – having a track record of completing deals is very attractive to vendor law firms.”

Research published by law firm M&A broker Acquira Professional Services in February reported that private equity investment in the UK legal sector reached a record high of £534m in 2024. That represented a 42% increase on 2023’s figure of £377m. Total investment over the last five years amounted to £1.2bn.

Currently, the largest private equity-backed law firm is top-20 practice DWF, which was acquired by Inflexion in 2023 after a chequered history as a listed firm.

Most legal commentators and academics believe private equity is unlikely to make large inroads into the UK top 50. 

This week, Laura Empson, professor in the management of professional service firms at Bayes Business School, predicted there would not be a “big bang” influx of private equity capital into the legal sector.

She told The Daily Telegraph private equity was attracted to the sector because “they can supply an immediate injection of cash that may appear highly attractive to the partners”.

However, she added: “But for the partners, this money comes at a very substantial price. They are submitting themselves to a far greater degree of scrutiny and control than they would have been before.”