Private equity investment in the UK legal sector reached a record high of £534m in 2024, spurred by significant capital reserves and the country’s liberalised legal market, according to new research.
Data compiled by law firm M&A broker Acquira Professional Services shows PE investment climbing by 42% from £377m in 2023 and reaching £1.2bn over the last five years.
Mid-market firm Inflexion has proven the biggest player, having spent nearly £450m in that time. DWF and conveyancing giant Movera are on its books.
Acquira noted that many PE firms are looking to profit through a buy-to-build model, acquiring a “platform” law firm and bolting on smaller practices with complementary expertise, with firms using the investment to scale their business and invest in technology.
It said PE-backed acquisitions of small firms by regional players had helped to create a buoyant market for UK law firm mergers, which numbered more than 120 in 2022 and 2023 and topped 150 last year. Acquira anticipates an even more active year ahead.
“In a competitive legal market, in which digital transformation is becoming vital to service delivery, law firms are seeking ways to scale their businesses,” said Acquira managing director Jeff Zindani. “One of the options is private equity investment. The capital injection that these investors provide allows law firms to build their practices and roll out the changes needed to create operational efficiencies and future-proof their practices.”
However, investment by PE firms in the legal market remains small in relation to the overall size of the market.
Jonathan Watmough, founder of consultancy HelpingLawyersThrive and the recently appointed chair of Rosenblatt, said: “PE needs drumroll, repetitive, institutional income to make their model work in commercial law firms. The problem is that most commercial law firm work is the opposite – episodic, unpredictable and the result of personal, individual, transportable, trust-based relationships.”
Aquira acknowledged the longstanding resistance among law firms to PE investment, driven by concerns over autonomy and cultural impact. It cited HSBC research of senior figures in the UK legal sector, which found that while nearly half (49%) anticipated a merger in the near future, only 8% expected PE to play a role in their immediate strategy.
Nevertheless, the proportion of respondents who viewed private equity as “less attractive” for their firm’s growth or transformation had fallen sharply from 33% to just 11%.
David Morley, founder of leadership consultancy David H Morley and former senior partner of legacy firm Allen & Overy, wrote on LinkedIn that while investment in non-traditional legal services had been buoyant, direct investment in partnerships had been "little more than a trickle."
"Even in the UK where external investment has been allowed for more than a decade, PE investment remains relatively muted," Morley said. "While more than 350 UK legal tech companies attracted £5.5bn of new investment in 2023, according to TheCityUK, direct investment in traditional firms is a fraction of this."
He added that recent deals, such as DWF's buy-out by Inflexion in 2023 and the acquisition of StoweFamilyLaw by Investcorp last September, were exceptions rather than the rule.
However Zindani predicted DWF's acquisition would encourage other larger corporate law firms to consider this route. In its first year under Inflexion’s ownership, it increased revenue by 14% and it has recently unveiled a string of eye-catching lateral hires in Canada, Australia and most recently London, where earlier this week it hired a four-partner marine insurance team from Kennedys.
But DWF’s route to private equity was an unusual one, coming via a turbulent experience as a listed company. After listing on the London Stock Exchange in 2019 amid much fanfare, its share price dropped sharply in the early months of the Covid-19 pandemic in 2020.
It subsequently cut jobs and scaled back operations in Australia, Brussels, Cologne, Dubai and Singapore, though its share price never fully recovered before its acquisition by Inflexion.
Since Mishcon shelved its plans to list in 2022, there has been little sign of interest among top law firms to abandon their traditional partnership structure.
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