Private equity’s increasing foothold in professional services has been well documented in recent years – and for good reason.
In the past year alone, high-profile transactions, including Grant Thornton, Cooper Parry and Evelyn Partners’ professional services arm, continue to demonstrate private equity’s interest and thematic conviction within the accounting sector. This appetite is somewhat built upon positive experiences within adjacent white-collar sectors such as insurance and wealth management, where private equity has focused on streamlining operations, driving efficiency and unlocking value in traditionally fragmented industries.
While ample opportunity for investment remains, the legal services space is beginning to emerge as one of the last untapped frontiers for large-scale capital transformation, presenting a compelling proposition for sponsors.
Historically fragmented and dominated by traditional models, the legal sector has yet to experience full-scale private equity backing and the associated benefits the asset class so frequently offers. With the right strategic investments, we see significant upside potential for private equity firms that can unlock value by professionalising operations, optimising customer acquisition and implementing technology-driven efficiencies.
Nuanced but high-potential market
However, recognising the opportunity in legal services requires an appreciation of its inherent complexities. Unlike accounting, which operates largely on metronomic revenue models, driven by recurring engagements and regulatory obligations, the legal industry is more nuanced. Prospective acquirers often divide the sector into distinct business-to-business (B2B) and business-to-consumer (B2C) segments, each with its own investment considerations.
The traditional B2B legal market, composed of magic circle firms and other large corporate law practices, remains a complex space for private equity. Long-established client relationships, bespoke services, and high-touch advisory work create natural barriers to rapid scaling. The project-based and cyclical nature of B2B legal services further adds to the complexity, making consistent value accretion more challenging. Additionally, cross-selling opportunities – so often the key to unlocking synergies in professional services – are not as straightforward in legal as they are in fields such as accounting or insurance.
Underlying these dynamics is the legal sector’s traditionally measured approach to change. In corporate law firms especially, long-standing partnership structures have fostered a culture of independence, legacy and autonomy, often favouring modest organic growth and incremental modernisation over external investment or large-scale transformation. Therefore, rather than widescale private equity investment across the B2B sector, we expect it to be more targeted, focusing on diversified, more forward-thinking law firms (for example, alternative delivery models).
B2C legal services tell a different story.
Consumer-facing legal businesses – such as personal injury, probate and family law – operate on high-volume, process-driven models, making them particularly well-suited for private equity investment. These firms would benefit significantly from centralised operations, targeted marketing strategies and automation, which can drive both efficiency and profitability.
Unlike their B2B counterparts, B2C legal services are generally less cyclical, as demand is often driven by life events – such as divorces, wills or injury claims – rather than economic cycles or corporate transactions. They also do not rely on entrenched client relationships. Instead, success hinges on brand awareness, lead generation and customer acquisition, all of which can be optimised with private capital. This scalability, combined with the potential for operational streamlining, makes B2C legal an attractive and underexploited market for investment.
Market is moving – slowly but surely
While a full-scale wave of private equity-backed consolidation in legal services has yet to materialise, there are early signs of movement. High-profile transactions, including the DWF and Stowe Family Law deals, are emblematic of the direction of travel and a clear sign of private equity’s growing interest in the vertical.
Should investment momentum build as we expect, the UK could take centre stage as a destination for foreign investment. Unlike the US, where regulations restrict private ownership of legal entities, the UK offers a more flexible regulatory environment, making it an open and attractive market for consolidation and innovation. As merger and acquisition activity gains traction in UK legal services, other European markets will likely follow suit.
Private equity has a well-established playbook for professional services transformation, and the legal sector represents one of the last remaining frontiers. Much like the accounting industry before it, the legal sector is fragmented, traditional and in many cases operationally inefficient, making it a prime candidate for private capital intervention. By professionalising operations, consolidating market players and modernising service delivery, private-equity-backed legal platforms have the potential to reshape the industry.
As the legal sector navigates the balance between tradition and transformation, firms that embrace innovation will gain a competitive edge, creating a prime opportunity for private equity to modernise and reshape the industry. The outcome will be a more efficient, more profitable legal sector that delivers superior outcomes for clients while generating strong, sustainable returns for investors.
Oliver Vaughan is managing director of investment bank Houlihan Lokey’s Business Services Group, London
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