Inflexion Private Equity Partner’s purchase of DWF last year made 2023 a blockbuster year for M&A in the UK legal services sector, with more deals expected to come in its wake.

There were 20 deals in the space last year, with a total volume just below GBP 523m (EUR 611.3m), according to Mergermarket data. The take-private of DWF was worth approximately GBP 515m, or 98% of the deal volumes in 2023.

Since 2015, deals involving UK law firms have amounted to more than GBP 896m, the data shows. Inflexion’s DWF transaction looms large – it contributed 57% to the total volumes since 2015.

Last year’s figure far exceeds the GBP 114m spent during 2019, the only time within the last decade that deal values totalled more than GBP 100m and ran riot over the comparatively paltry GBP 25.6m recorded during 2022, the data shows.

Inflexion had been a client of DWF for more than ten years. The private equity (PE) firm will continue to use the firm to support its portfolio companies with advice, it said at the time.

Looking ahead, smaller firms that are feeling the heat of competition could consider deals, while larger firms also see the advantage of building bigger organisations. “Beyond smaller boutiques or specialist firms, most ‘full-service’ firms recognise the need to identify growth opportunities to retain or strengthen their market positions,” said Eifion Morris, CEO of Stephenson Harwood.

“Consolidation can be an attractive way to enhance capabilities, improve efficiency, and expand market reach,” Morris said. “It’s no secret that market conditions have been challenging over the last few years and client budgets are under increased scrutiny.”

The Solicitors Regulation Authority said there were 5,194 incorporated companies in the UK at the end of March (56% of the total number of solicitors). The rest of the market is divided between sole practitioners (1,561), limited liability partnerships (1,456) and partnerships (1,091).

“Firms which are able to take advantage of greater resources and expertise, and work more efficiently by embracing technological advances, to deliver the high-quality advice clients expect, will have an important advantage,” Morris added.

Succession issues can be a driver of M&A for smaller firms. “If an equity partner wants to leave, there needs to be someone to come in and take their share,” Lawfront CEO Neil Lloyd said, adding this could prove to be prohibitive to some partners because of the cost of entry, as well as their appetite and ability to do so.

“Another major factor, which is more important, is that partners look at the high cost of remaining competitive,” Lloyd said. Lawfront’s COO Axel Koelsch added: “The firms we talk to have legacy practice systems, these have escalating costs and the inability to support modern working.”

Lawfront expects to announce a deal by the end of the year and is talking to a number of targets. A number of other firms are also actively seeking targets. Nine deals have already been announced so far this year, according to Mergermarket data, with more to come.

by Lloyd Vassell with analytics by Santosh Shetty

Proprietary Intelligence

Lawfront (25 April)

Legal services business Lawfront is in acquisition talks with a number of targets and expects to announce a transaction before year-end, CEO Neil Lloyd said. Backed by private equity firm Blixt, Lawfront is an industry consolidator focused on acquiring leading regional firms throughout the UK as well as small bolt-on practices. The company provides a platform for regional firms to grow their operations inorganically, and its expertise in the financial and regulatory spheres enables targets to accelerate their organic growth.

Right Legal Group (27 March)

Right Legal Group aims to open up to 12 new offices within the next five years and sees M&A as an option, CEO Carrie Caladine said. The Vespa Capital-backed firm is searching nationwide for potential opportunities. Right Legal Group already works with several high street practices on wills and probate legal services matters, referred to as private client law, which could lead to takeover discussions. It also receives a lot of inbound interest.

Howes Percival (11 March)

Howes Percival will continue to review potential bolt-on acquisitions to bolster its offering throughout Central England, Chairman Geraint Davies said. An industry counterpart with up to 10 partners, 40 staff and focused on the firm’s core practice areas would be ideal, with the likelihood of merging with a similar-sized or larger counterpart downplayed. The firm’s primary focus is a target’s cultural fit, client focus and position in a Central England university town with a “thriving business community.” Transactions could occur in new locations, as well as those where it already has a presence, he added.

Stowe Family Law (26 February)

Stowe Family Law backed by Livingbridge, sees M&A as a core part of its growth strategy and is in various stages of discussions with potential targets, Chairman Ken Fowlie said. Counterparts with a strong regional position are the focus. The legal service industry is filled with firms with a similar profile to Crisp & Co, an 11-50 strong firm acquired in December 2023. Stowe is likely to announce an acquisition before end-2024, and is working with Springboard Corporate Financial on lead generation, building relationships with potential opportunities and deal due diligence matters.

Cripps (22 February)

Cripps is alert to inorganic growth opportunities to broaden either its domestic footprint or skill set, Managing Partner James Beatton said. While the focus is on integrating PDT Solicitors, with which it merged last year, and hiring new partners and team members, Cripps seeks firms in which the partners “with drive and ambition” remain on board post-deal. It has an “ambitious” growth plan, concentrating in particular in and around London and the South of England.

Nelsons Solicitors (16 February)

Nelsons Solicitors is interested in acquisitions that would expand its regional presence throughout the East Midlands, CEO Stewart Vandermark said. The firm’s targets are part of its plan of doubling its turnover to GBP 40m within an unspecified timeline. The challenges facing smaller firms, such as salary inflation, the lack of emerging new talent and the large number of elder solicitors who took early retirement post the COVID-19 lockdowns, are prompting many to seek tie-ups with larger organisations.