Introduction
I am pleased to introduce our inaugural report on merger and acquisition (M&A) activity in the legal sector, which paints a positive picture of deal activity in the year to June 2023.
There are a number of competing pressures for law firms, as fleshed out in the following pages. M&A is now either a strategic priority or, potentially, a necessity to maintain earnings and continue to develop service lines and depth of expertise in an ever more complicated world.
The well-established listed law firm model continues to be a driver in some of this activity, although the period has seen some turbulence. We’re starting to see private equity interest in professional services and at the time of this publication, we see global law firm DWF being taken private by Inflexion in a £342m deal. However, only two of the listed law firms would have returned some capital growth post-IPO (initial public offering), which for all of them includes the tumultuous Covid-19 period.
Interestingly, but perhaps not surprisingly, the majority of acquisitions are of smaller firms with 20 or less employees. Cost pressures, particularly professional indemnity (PI) insurance renewals, are becoming increasingly painful and therefore merging with another firm is helping to mitigate the impact on profits.
We’re increasingly seeing mid-size firms looking to acquire smaller counterparts to provide critical mass, and small firms looking to merge with larger equivalents.
This will likely increase activity, especially with the potential for further PI insurance pricing challenges. We still see succession (and lack of planning for this) being another driver for merger activity, and we may be seeing a generational shift in attitudes to risk.
I hope you find the results interesting and if you’d like to discuss any of the contents, please do contact me, or your usual Saffery contact.
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