Transaction volumes
The year to 30 June 2023 represented a buoyant year for M&A activity in the UK legal sector, with the total number of completed transactions increasing by 60% in comparison to the prior comparative period.
Overview of key themes
- A total of 69 transactions completed involving UK legal firms during the 12 months to 30 June 2023*. This represents a significant increase on the 43 deals completed in the 12 months to 30 June 2022.
- Business uncertainty following the Covid-19 pandemic, followed by ongoing inflationary pressures, has limited wider industry growth. Additionally, rising professional insurance costs are adversely impacting partner profits, particularly with smaller firms. However, a number of legal sub-sectors are counter-cyclical, which has helped to mitigate the adverse impact of the wider economic landscape.
- UK legal firms have broadly adopted two strategies to counter these industry wide challenges. Firstly, firms have sought to invest in IT solutions to make use of artificial intelligence and smart contracts to minimise the risk of human error and drive efficiency gains in routine work.
- Secondly, firms have undertaken extensive M&A initiatives in order to both broaden service offerings and benefit from economies of scale. This is the key factor which has driven the significant increase in transaction volumes in the year to 30 June 2023. Transaction volumes have been buoyed by significant acquisition sprees having been undertaken by both Gately (Holdings) plc and Knights Group Holdings plc since their IPOs in 2015 and 2018 respectively.
- Despite the relatively high levels of recent M&A activity in the UK legal sector, 92.9% of UK law firms have less than 20 total employees. The prevalence of such small law firms demonstrates how fragmented the sector remains and represents a key opportunity for continued consolidation in the market.
Summary of historic monthly transaction volumes
Source: CapitalIQ, MarketIQ, IBIS World (*)
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