Almost half of firm leaders have told a survey they are contemplating a merger as they look to reinforce their business coming out of the pandemic.

Interviews with 100 law firms of varying sizes found almost half (47%) are considering merging with another firm, with a quarter of those already in talks over a possible deal. The most common reason given for firms looking at M&A is geographic expansion, while others want to expand into new practice areas and to scale up and compete.

Other firms seeking to drive growth are considering private equity investment (cited by 37% of respondents), while 18% of large firms and 9% of mid-sized firms are looking at a possible flotation.

The research was commissioned by M&A advisory firm Acquira Professional Services, a business founded by former Russell Jones & Walker partner Jeff Zindani.

He claimed the general sentiment in the market is that greater consolidation is on the way, and suggested that law firm owners should no longer think that growth can be attained by organic strategies.

‘We are in an era where customers expect slick, professional services and it may be that being a larger, better-funded operation is the way to achieve that more quickly,’ he added.

The report accompanying the Acquira research said consolidation will be driven this year by the hangover from the pandemic, and firms reassessing how strong their business is.

‘Whatever value partners felt they had in their business, something like Covid can take away overnight,’ the report said. ‘It has concentrated minds.’

John Durkan, managing director of Yorkshire firm Switalskis and a contributor to the report, said an unprecedented number of firms are looking for an acquisition deal. The personal injury reforms, cutting off income streams for many smaller firms, has been a contributing factor, as is the older demographic of many practice owners.

Durkan said: ‘There are quite a lot of ‘ghost’ firms out there that are not attractive acquisition targets as they are not making profits but only surviving because they took out government-backed loans to prop up a failing firm.

‘Once the loan repayments kick in, they can’t afford to make the repayments, so I expect there will be more law firm failures over the coming year.’

The most recent figures produced by the SRA show there were 9,809 firms in December 2021 – a fall of 247 (2.5%) in the last year and 11% down on the same time 10 years ago.