Small and medium sized firms are backing away from merger thoughts over fears about the financial risks, research published today suggests.
A LexisNexis survey of 308 lawyers at these firms found that just 5% are even considering mergers or acquisitions in their growth plans. As well as the financial risk, half of those polled said they were put off by the difficulty of finding the right partner.
When the same survey was carried out in the past two years, 10% and 13% of respondents respectively said they were interested in merging with other firms.
In the latest research, nearly three-quarters (72%) of lawyers surveyed said their firm plans to grow organically, up from 63% in 2024 and 40% in 2023.
‘Firms are seeking full control over their operations, signalling a careful rebalancing rather than a race to scale,’ said Tim Rayner, small law market lead at LexisNexis UK.
More than one third of lawyers said the tough economic climate was the biggest factor holding back their firms, although 58% reported that their businesses had grown – up by 10 percentage points last year. Less than half of firms (43%) plan to invest more in tech in the next year, while a smaller proportion (39%) will increase hiring spend. One-third plan to invest more in marketing.
AI is becoming a greater influence on everyday operations, with 39% of firms saying it has driven increased tech investment, particularly in legal research and document automation. But issues such as limited time and resistance to change are slowing progress.
Rayner added: ‘This year’s findings show that small firms aren’t standing still. They’re moving forward with purpose. Growth, investment and innovation are happening, not through radical change, but through smart, sustainable decisions that protect profit margins and deepen client relationships.’
One area subject to change in the last year is client expectation. Four in five lawyers reported increased pressure to respond faster, while 50% said clients now expect clear, upfront pricing. A third (33%) said clients are demanding more flexibility in how legal services are delivered.
