Q&A: Why law firms are opening their doors to investment         

Drivers and trends in legal sector M&A  

The UK legal sector is undergoing a period of transformation. Long considered a traditional stronghold of partnership structures and organic growth, the industry is now attracting significant investment interest, particularly from private equity backers.

Against this backdrop, we spoke to FRP Corporate Finance Partners Darren Miller, Chris Adlam, Daniel Brecker, and Debt Advisory Partner Tom Cox about the driving forces behind recent M&A trends in the legal sector, the motivations of law firms, and the opportunities and challenges that lie ahead.

What have the recent M&A trends been in the legal sector?

Darren Miller: “The trend of Private Equity firms looking for investment opportunities in the UK legal sector has been building over the last few years. The Legal Services Act 2007 allowed non-lawyers to own and manage law firms, but Private Equity involvement is still relatively new.  Livingbridge’s investment into Stowe Family Law in 2017 and Phoenix Equity Partners acquisition of Setfords from BGF in 2021 were early examples, but there has been much more activity since Lawfront embarked on its buy & build strategy with the acquisition of Farleys in 2022, backed by Blixt.  Since then, Lawfront have completed 12 further acquisitions. 

“A landmark deal for the sector was Inflexion taking DWF private in 2023.  This was followed by a flurry of deals in 2024, including Vespa Capital’s investment in Right Legal Group; Waterland Private Equity’s investment in Beyond Law Group; Investcorp’s acquisition of Stowe Family Law from Livingbridge; Horizon Capital establishing its buy and build platform Adeptio Law Group, and acquiring FBC Manby Bowdler; CBPE’s investment in Horwich Farrelly; and Aliter Capital’s investment in BBS Law. 

“So far in 2025 we have seen LDC investing in Harper James, August Equity investing into Higgs and Lawfront completing its most recent acquisitions of Brachers and Trethowans.”

Daniel Brecker: “While investors have long been active in accountancy and wealth management, there’s been a sharp increase in private equity interest across the UK legal sector in recent years – and for good reason. Consolidation can bring operational efficiencies, high cash conversion from EBITDA and recurring revenue through long-term client relationships – and, as more than 90% of UK law firms have fewer than 20 employees, there’s a compelling opportunity for investors to scale through organic growth and buy-and-build strategies.

“There’s also real value in law firms using M&A to consolidate back-office functions – from PI insurance to IT systems, HR and finance. This can further enhance margins and enable lawyers to focus on their clients, while giving them an ideal platform from which to cross-sell services across both geographies and specialisms.

“Last year for example, we supported Manchester-headquartered BBS Law on a significant investment from private equity firm, Aliter Capital. A strong business with a skilled management team, BBS was an attractive prospect for private equity investment and in Aliter Capital, it found a partner that not only offered a good cultural fit, but one with the resources and expertise to help it achieve its ambitious plans to develop through organic growth as well as targeted acquisitions. We’re continuing to work with the business as it looks to secure further strategic bolt-ons to expand its offering across the UK.”

Darren Miller: “Legal services, like other professional service sectors, tend to operate with strong recurring or re-occurring income and have long-standing client relationships that can generate high margins. This kind of stability is attractive to investors. But investment in legal tech, AI, and cyber resilience are key drivers of future growth and firms must invest, or risk being left behind. This is where private equity investment comes in. With a track record of scaling businesses, improving operational efficiency and injecting strategic capital, private equity investors are well placed to help law firms scale.”

Tom Cox: “We’ve seen a notable uptick in deals involving patent and trademark sectors, as firms operating in this space typically generate compelling recurring revenues from renewals and watching services, whilst also offering significant upside from high-margin enforcement and litigation support. This combination of stability and profitability is highly attractive to private equity investors.

“Take our work advising Sovereign Capital Partners on the acquisition of Murgitroyd, the IP services provider. It’s a great example of how firms with strong fundamentals, recurring revenue, international client bases and a focus on high-value services – in this case, a rare proposition in the IP market by providing an integrated attorney-led offering and associated IP support services capability – attract serious investor interest.”

What is motivating legal firms to consider a transaction?

Darren Miller: “Legal firms considering a transaction are not necessarily driven simply by the opportunity to crystallise value — they’re also looking for scale, evolution and long-term resilience. For ambitious firms, becoming part of a larger group is about enhancing their proposition and expanding what they can offer both to their clients and their people.

“What makes some of the consolidators particularly attractive is the ability for firms to retain their brand and regional leadership, while tapping into investment and the efficiencies that come with scale. It’s an opportunity to bring in top-performing partners, broaden their service lines and modernise operations – especially in areas like AI, legal tech and cyber security.

“These are essential investments for firms wanting to stay relevant in a fast-changing market, but they’re also expensive. Many of the best-run firms recognise that meaningful innovation at scale is tough to fund alone. That’s why we’re seeing a growing number make the strategic choice to align with backers who understand the long game and can support them through it.”

Daniel Brecker: “Across the market, we’re seeing technology investment as one of the strongest drivers behind law firms’ interest in securing capital. Whether it’s automating workflows, upgrading case management systems or enhancing client-facing platforms, the funding demands are considerable.

“That’s especially true for firms in fragmented parts of the market where there’s scope for consolidation. These firms are increasingly forward-looking – they want to scale their operations and extend their reach through acquisition, but they need the capital and capability to do that confidently.”

Tom Cox: “Increasingly, law firms aren’t looking for an exit in the traditional sense, but they need additional funding via debt or equity to facilitate ongoing tech transformations to enhance operating efficiency, whilst also unlocking the firepower needed for acquisitive growth in what remains a highly fragmented market.

“While gearing levels haven’t traditionally reached the levels we have seen in accountancy roll-ups, driven in part by perspectives on WIP lock-up and the perceived dependency on key partners to maintain long-term recurring revenues, we are seeing an increasing number of lenders willing to support the sector in light of more active private equity support and the value accretive buy-and-build thesis, evidenced by Investec’s continuing support of the Lawfront platform.

More recently we have also seen Shawbrook back the BBS Law transaction and Investec recently supported LDC’s investment in Harper James, highlighting increased conviction in the financing of high-quality, tech-led law firms with a commercial focus”

What are the additional challenges faced by PE investors looking at the legal sector and partnership models?

Darren Miller: “In the legal sector, clients often have strong personal relationships with partners, so from an investor perspective, retaining and motivating senior staff is crucial. Fees are often re-occuring, with clients being loyal to their trusted legal advisers as and when a need arises, rather than annually recurring based on regulatory requirements, which is why revenues can be more dependent on partner retention than in other professional services sectors such as accountancy.  Investors also look closely at the target’s reputation for high-quality service and strong practice management. Due diligence isn’t just financial – it’s about brand, risk governance and leadership. Cultural alignment is another major factor. A law firm’s culture is a huge part of its success story, and the wrong integration approach can unravel that very quickly.

“Structuring these transactions can throw up unique complexities. Most firms’ net working capital is funded through partners’ capital and current accounts. That needs to be repaid on completion, and if the business has a net debt position, it’s deducted from the headline valuation. That can sometimes lead to tension, as partners are more focused on what ends up in their pocket post-deal than the total enterprise value.

“And let’s not forget the shift to corporatised profitability. Converting a partnership model often comes with significant cost – employers’ National Insurance, pension contributions, apprenticeship levies and other overheads. The move can be strategically beneficial, but it must be carefully modelled into deal discussions.”

Daniel Brecker: “One of the biggest challenges in legal transactions is valuing the business in the first place. Traditional partnership models don’t reflect normalised salaries for partners, which can reduce EBITDA and make comparison tricky. For investors, especially private equity, this raises real questions around deal structuring.

“Exit strategy is another point that needs real clarity. Some partners are still navigating the emotional shift from owner to employee, and that has implications for how exits are structured – especially where rollover equity is involved. You’ve got to strike a balance between personal upside and institutional growth, and that’s not always easy.

“What I’ve found is that the most successful deals are those where firms have taken the time to get under the skin of their own numbers, operating model and succession planning before going to market. That upfront preparation makes a huge difference in creating the right narrative and reducing friction later in the process.”

Chris Adlam: “One of the hardest parts of any legal sector deal is managing expectations around profit and reward. Partners can be used to high profit shares and autonomy, and it can be tough to introduce the rigour and return profile that a private equity investor is looking for.

“It’s important to create a structure where partners remain incentivised but also align with investor priorities, and this is where our role as advisors is so important. We help both sides understand the trade-offs, ensure the deal is well structured, and above all, make sure the long-term vision is aligned. If that’s not in place, both parties may end up disappointed with their returns from the deal.”

How do you think the market will respond to PE investment?

Darren Miller: “Professional services clients are, above all, focused on the quality of service they receive from their advisers. Ownership structures matter far less to them than whether their adviser is responsive, effective and adds value.

“We only have to look at the accountancy sector to see how this can play out. Private equity investment has been extensive in that space, and it’s been business as usual. If anything, service standards have risen as firms have invested in people, systems and technology.

“In the legal sector, it’s reasonable to expect a similar outcome. If firms keep their standards high and use the investment wisely, clients will stay loyal.” 

Tom Cox: “Securing a private equity backer can enhance the perception of law firms, so long as the investment is clearly linked to client benefits. Clients want fast, clear and high-quality service. If investment leads to better technology, smoother processes and a more engaged team, then it becomes a very compelling proposition. Faster completions, better visibility, more responsive updates. That’s the kind of impact clients notice and appreciate.

“For me, it’s all about alignment. When the firm’s vision, investor support from both equity and debt, and client priorities are in sync, the market responds positively – and trust is actually strengthened.”

Daniel Brecker: “The legal market can benefit hugely from private equity backing, using investment to broaden their service lines, hire great people and roll out better systems. By telling the right story to customers, the market can see the deal for what it is: a commitment to continuous improvement.

“There’s also a real opportunity for firms to differentiate themselves through M&A. Those that can point to meaningful investment in their infrastructure and delivery model will stand out. It’s not just about growth for growth’s sake, it’s about being better at what you do, and showing clients that you’re investing to broaden their experience.”