The rise of private equity interest in law firms

The world of private equity continues to expand its influence across professional services, and law firms in the UK are increasingly becoming the next target for investors. Following years of acquisitions in accounting firms, private equity (PE) investors are now turning their attention to the legal sector. This trend highlights the growing appeal of law firms as a means to access stable returns and new growth opportunities within a historically fragmented industry.

Many of the UK’s 8,500 legal practices are still structured as traditional partnerships, owned collectively by the partners who divide profits at year-end. However, there is a growing interest among small and medium-sized firms in leveraging private equity funding to modernise technology, acquire rivals, and expand operations. For example, Harper James, a law firm founded in 2014, is considering PE backing to unlock its merger and acquisition potential. Founder Toby Harper emphasised how such partnerships could provide not only financial resources but also valuable expertise to propel future growth initiatives.

Some major names in the field have already entered discussions about potential sales. Firms such as Northridge Law, Midlands-based Higgs, Yorkshire’s Switalskis, and Greenwoods have reportedly sought private equity investors. Valuations for such deals are expected to range anywhere from £50 million to £150 million. The ultimate prize for PE investors, however, remains the ability to execute “roll-up” strategies—buying multiple firms, consolidating operations, and reducing costs to enhance the scale and profitability of the combined business.

Despite the potential upsides, private equity investment in law firms carries risks. A noteworthy challenge cited by critics lies in aligning law firms’ cultures with the profit-driven focus of private equity. Darryl Cooke, founder of Gunnercooke, recounted that his firm weighed the option of PE ownership but ultimately declined due to concerns over the potential disruption to its values and long-term culture. His decision underscores the tension many legal firms face when balancing tradition with the allure of external investment.

Private equity interest in legal services stems largely from the sector’s untapped potential. While some law firms operate with cyclical revenue streams tied to unpredictable legal advice, others, such as DWF, attract investors by offering stable, long-term contracts with major corporations. In 2023, private equity firm Inflexion’s £343 million acquisition of stock market-listed DWF showcased how investors value firms with recurring services like insurance processing. This allowed DWF to shift away from the volatility associated with public markets and focus on strategic growth investments, such as artificial intelligence implementation and further acquisitions.

While many firms are tempted by the capital and expertise offered by private equity, others remain cautious. For Cooke, preserving the legacy of his law firm and passing it to the next generation was more important than short-term financial gain. However, as the wave of private equity interest continues to build, many in the legal profession are likely to face difficult decisions about the future trajectory of their practices.