One in five law firms eye private equity for growth, new report reveals

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Around 21% of the UK’s leading law firms are considering private equity investment to fund growth and transformation, according to HSBC’s 2025/26 law firm strategy and investment report.

The report was produced in collaboration with legal business management publication Briefing and surveyed more than 90 law firm leaders – from firms with turnovers between £18 million and £1 billion. Findings revealed that nearly a quarter of firms (24%) are attracted to private equity investment, while 20% are exploring litigation funding. However, data showed that traditional bank financing remained dominant, with 74% of firms still looking to banks, particularly among larger practices.

Private equity interest in 2025 may stem from 70% of law firm leaders viewing rivals' tech investments as their biggest competitive threat. Respondents highlighted the need for additional financial firepower to compete with tech-driven business models and adapt to disruptive market forces. A webinar launching the report noted that investors are keen to replicate successes seen in accountancy and consultancy platforms, with “a lot of dry powder [ie, investment cash] looking for a home in high-quality businesses”.

Technology investment is also rising in the face of growing cyber risk and the pressure for law firms “to be as streamlined and competitive as possible for cost-conscious clients”. The report found that firms plan to allocate an average of 6.5% of annual revenue to tech initiatives by 2026, up from 6.1% in 2024. Generative AI is expected to play a role in knowledge management, workflow summarisation, legal production and marketing. While concerns over AI accuracy have eased, down from 51% to 40%, uncertainty over return on investment has grown, now cited by a third of respondents.

Head of professional services at HSBC, Victoria Ritchie, said: “The increasing appeal of private equity investment underscores a strategic shift in the legal sector. Firms are recognising the potential of external capital to fuel growth and innovation, allowing them to remain competitive in a rapidly changing market.”

The survey also found that one in five firms anticipate “significantly more” M&A activity over the next 12 months. However, strategic hires to support existing teams was cited as the most popular growth route (82%), followed by sector specialisation (59%) and expansion into new geographical regions or specialisms (58%). Buying other law firms ranked fourth at 43%.