Law firm mergers fall lower than ever

Reading time: one minute

Merger and acquisition (M&A) activity in the UK legal sector has fallen to its lowest level in a decade. According to research by accountancy firm Hazelwood, the increased demand for legal services over the past two years increased profits for smaller law firms. As such, partners chose against selling their firms and instead enjoyed bumper profits, leading to a decrease in M&As.

Hazelwood’s partner Ian Johnson explained: “Over the last two years, law firm partners haven’t wanted to sell as they watch the profits roll in. Business has been booming and a lot of partners have been enjoying the profit distributions.”

However, the economic crisis that’s predicted to hit the UK in the coming months could put an end to this trend with consolidator firms buying up smaller law firms. “Consolidator firms looking to scale up or expand their geographic footprint through acquiring smaller firms will find there are a lot of opportunities to do so at the moment,” Johnson added.

Sector experts have forecast that merger activity will pick up again as law firms look ahead. Dealmakers are coming back to the table and finding that “owners of a lot of good-quality law firms are now ready to listen to offers”. According to Johnson, older partners at smaller firms are selling their holdings as a “key part of their plan to fund their retirement”. He added: “As the economy slows and the boom for law firms ends, we expect to see more partners putting their firms up for sale.”