UK law firm mergers rose last year as ‘growing by acquisition’ becomes more attractive

New data reveals the number of law firm mergers in the UK has risen by nearly a quarter in the past year – from 99 in 2021 to 122 in 2022.

New research from accountancy firm Hazlewoods shows merger and acquisition (M&A) activity in the sector has rebounded following a pandemic slump.

According to Hazlewoods, M&A deals within law typically occur where an acquirer is looking to add sector or service line expertise, a new regional presence, improve economies of scale, or if firm owners are entering retirement.

Merger numbers have not yet recovered to pre-pandemic levels. While mergers rose to 122 last year, there were 174 UK law mergers in 2018. 

Ian Johnson, associate partner at Hazlewoods said: “After two sluggish years M&A activity between law firms has come back to life. Expansion minded law firms are feeling more confident about acquisitions of firms with very specific expertise or those firms that have been struggling with their profitability.”

“A very tight labour market that made it hard to recruit lawyers and grow organically, that makes growing by acquisition look more attractive.” 

Tougher macroeconomic conditions may have encouraged firms to pool resources and drive down costs, for example by sharing costly office space amidst the shift to hybrid working.

Johnson adds that the drop in numbers in 2021 may be explained by firm partners postponing retirement and delaying potential mergers.

The news comes after law firms Allen & Overy and Shearman & Sterling announced plans to merge late last night, which would create a firm with approximately $3.4bn in combined revenues.

The tie up marks one of the biggest legal mergers in recent history, forging a firm with 3,900 lawyers across 49 offices around the world.