Just shy of half (43 per cent) of law firms are looking to acquire or merge with other businesses over the course of the next year, as they fend off increased competition from boutique offerings, figures out today have found.
By comparison, when Smith & Williamson asked the same question last year in its annual survey of the legal sector, just 28 per cent said they were looking to pair up with another firm.
With 59 per cent of the over 100 UK-based law firms surveyed this year reporting a rise in competitive pressure, Giles Murphy, head of professional practices at Smith & Williamson, noted many were carefully considering targeted moves to add to their portfolio of services and make them stand out in a crowded market place.
"The right acquisition combined with an effective strategy can help firms to scale-up and develop market presence in a chosen niche or by geography, and so set themselves apart," Murphy said. "The growing trend of relatively small acquisitions as opposed to full mergers can also deliver the benefits more efficiently as the incoming team simply plugs in to the larger acquiring firm as if it were a lateral hire.
"In contrast, it can take years for two similarly sized businesses to reconcile reward structures, roles and disparate systems following a merger resulting in the risk of them being inward focused at a time when they should be seeing the benefits of the combination through increased levels of income."
Despite the heightened competition, many were still optimistic about the future of their firm. An overwhelming 93 per cent of those questioned stated they were confident about the year ahead, although this is down on the 99 per cent who expressed the same sentiment the year before and this year's survey was also carried out before June's Brexit decision was revealed.
"There are plenty of opportunities out there, but the growing strength of specialist firms, coupled with the arrival of new entrants means firms must fight hard to maintain market share and keep up with clients' growing demands," Murphy continued. "The uncertain economic environment compounds all this. Ultimately, setting, deploying and executing a strong strategy is fundamental."