Blech: PE in the law will gather pace
Seven in 10 of mid-sized law firms have been contacted in the last year by a private equity (PE) investor or PE-backed law firm about acquisition, according to new research.
Moreover, 37% overall and 41% of firms approached would be open to being acquired into a PE model.
The main upsides of external investment, according to the survey, were that it would improve the position of partners – “particularly through a lesser need for partner capital investments and secondly by maximising the exit value of the business” – and would unlock acquisition-based growth and also facilitate investment in technology, particularly artificial intelligence, now used by 65% of firms.
However, nearly half of respondents were concerned by the erosion of decision-making control if a PE investor were involved and 35% were worried about the resultant cultural change.
These two factors were ranked significantly above any other concerns found by accountants MHA, whose study – Strategic Sector Insights for the Legal Profession 2026 [1] – was conducted in association with the Law Society.
Senior decision-makers at 60 firms were polled, mostly firms with turnovers of up to £35m.
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MHA said the number contacted by PE “clearly demonstrates the reach of the investors and the significant resources that are being deployed in the legal sector”, and the fact that two in five were open to it showed how the market had changed.
“It was not very long ago that the thought of such a strategy would be given short shrift by industry leaders,” the report said.
“As the PE driven M&A market gathers pace, firms will be faced with the decision of either staying as they are and gradually falling behind the competition or getting on the bus to keep pace.”
Surprisingly, given the prevailing trend of recent years, 24% of firms saw a stock market listing as a viable option for a growing mid-sized firms.
They “have likely seen the increased interest rippling though the accountancy sector”, suggested MHA – which itself listed last year – but this sentiment appeared to be “at odds with the feedback we are hearing anecdotally in the market”.
As with last year’s edition [3], a large number (43%) of respondents believed there was less desire to become a partner, given the extra risk and responsibility involved.
But MHA said the increasing role of PE was another factor, and all partners and staff have to understand the potential benefits and buy into the process.
“PE investment tends to benefit the senior equity partners and those who are looking to retire. In the short term, such partners are likely to benefit from a cash windfall because of this.
“The more junior partners are unlikely to see the benefit of such funds personally but will be the ones who have to report results to the investors and ensure the profitability projections are being met, whilst having to relinquish much of the day to day control they have worked to inherit from senior partners.
“The advantages for junior partners and potential new partner recruits may therefore by limited, especially if arrangements include lengthy tie down clauses and ignore other potential incentives.
“Such individuals may also see much of the profit they are working so hard at creating being paid out to the investors.”
On M&A more broadly, the report identified a decline in mergers and rise in acquisitions. “Whilst the reality has always been that a true merger rarely exists, there appears to have been a recent acceptance that deals are in fact acquisitions.
Overall, only 22% of firms were considering a disposal, merger or acquisition in the next 12 months, “lower than one would expect in a consolidating market”.
Nearly half (46%) of firms stated that increasing market share was their greatest opportunity in the foreseeable future, meaning many firms were happy to rely on an organic growth strategy in the short term. “But in a tightening market this may be increasingly challenging,” MHA said.
It said 62% of firms surveyed (up from 42% last year) have seen revenue rise by more than 5% (37% reported more than 10%).
“There could be a number of reasons for this increase, including higher prices being charged by firms to offset rising costs being faced, more specialist services being provided commanding higher fees and consolidation of law firms making the remaining firms larger in size than has been seen previously.”
Robert Blech, head of professional practices at MHA, commented: “Private equity investment is expected to continue and indeed gather pace in the coming years, particularly because the legal sector remains highly fragmented and therefore buy and build strategies are attractive.
“While such moves offer the potential for growth and competitive advantage, they also bring significant challenges—including the risk of losing control and shifts in company culture.
“Combined with rising costs and a regulatory landscape in flux, these factors create real uncertainty for the sector, fundamentally reshaping the desire to progress to partnership and demanding careful navigation to ensure long-term success.”
Among other findings were that most firms maintained relatively low attrition rates (43% of firms reported staff turnover between 1-5%), with higher pay elsewhere still the dominant cause of departures.
Feedback also suggested that some firms who downsized during the pandemic are now reaching capacity again as in-office attendance increased.