Seventy percent of mid-sized law firms have been approached by PE investors in the last year, according to an MHA study in conjunction with the Law Society.
The report is based on a survey of the leaders of over 60 mid-sized law firms in England and Wales. The firms all had between 8 to 50 partners. The study highlights key trends shaping the legal profession in 2026, including technological advancements, workforce dynamics, financial performance, and ESG considerations.
2025 has seen a shift in the legal and wider professional services landscape in terms of external funding with PE investors taking more interest than ever before. Almost 70% of firms said they had been in contact with PE investors or another PE backed firm. Nearly a quarter of firms also said they were actively considering following in MHA’s footsteps and planning to IPO.
“Private equity investment is expected to continue and indeed gather pace in the coming years, particularly because the legal sector remains highly fragmented and therefore buy and build strategies are attractive.
“While such moves offer the potential for growth and competitive advantage, they also bring significant challenges - including the risk of losing control and shifts in company culture. Combined with rising costs and a regulatory landscape in flux, these factors create real uncertainty for the sector, fundamentally reshaping the desire to progress to partnership and demanding careful navigation to ensure long-term success.”
Robert Blech, head of Professional Practices at MHA
Partnership is becoming less desirable
The waning attraction of the partnership model is reflected by the fact that only 14% of those surveyed said that within the firm there was a strong interest from Associates in becoming partners while 43% indicated that partnership was perceived to be less desirable than in previous years. The survey found that increased costs and changes in regulations are creating uncertainty and explaining why fewer people now aspire to partnership compared to the past.
However, there are also potential drawbacks for junior partners and new recruits in law firms when private equity investment is involved. The concerns that restrictive contractual clauses and a lack of further incentives may limit the appeal for these individuals, especially as much of the profit generated by their efforts could end up being distributed to external investors rather than reinvested in the firm or shared among partners.
For PE to be genuinely effective and to ensure the long-term prosperity of a law practice, it is essential that all partners and staff understand the advantages and are committed to the process. Without widespread buy-in and a clear demonstration of benefits, the success of integrating private equity into law firm structures may be compromised.
Hybrid working
The sustained lack of appetite for partnership reflects a wider trend seen across the profession over the last few years, as individuals weigh the additional responsibilities and personal liabilities of partnership against alternative career paths offering improved work-life balance and financial stability.
The survey highlighted a continued evolution in office strategy among mid-sized law firms, as hybrid working practices mature and firms focus on recalibrating rather than redefining their space. Almost half of respondents (49%) confirmed they plan to make no changes to their office space, with only 6% of firms planning to reduce space or close an office.
Staff numbers are still a dominant factor influencing property plans for 65% of firms, which demonstrates while hybrid working remains influential, office planning continues to be shaped primarily by headcount and recruitment. Feedback suggests that some firms who downsized during the pandemic are now reaching capacity again as in-office attendance increases. The findings suggest that reductions in physical footprint have largely already taken place in earlier years.
Staff turnover levels remain broadly stable, with most firms maintaining relatively low attrition rates, 43% of firms reported staff turnover between 1-5%. Higher pay elsewhere remains the dominant cause for departure with 67%, up from 65% last year, reinforcing salary competition in a tight labour market. Other factors include lack of progression opportunities (16% down from 24% last year), and relocation (19% down from 31% last year). Hybrid or remote working arrangements was cited by 13% as a determining factor, as hybrid working is now seen as an expectation, not a privilege, indicating flexibility policies continue to influence retention and employee satisfaction.
Firms report turnover increase
Sixty two percent of firms saw of firms have seen an increase in revenue in excess of 5% year-on-year, compared to 42% in 2024, with 37% reporting an increase in excess of 10% (up from 26% last year).
There could be a number of reasons for this increase, including higher prices being charged by firms to offset rising costs being faced, more specialist services being provided commanding higher fees and consolidation of law firms making the remaining firms larger in size than has been seen previously.
Additionally, it has been noted that many firms are now appointing leadership positions to non-legally trained individuals who have a sharper focus on running the firm as a business, developing growth strategies and improving efficiencies. Of the firms surveyed only 3% saw a drop in turnover and 13% of firms reported turnover has remained at the same level as in the previous year (down from 19% in 2024). The low number of firms with a reduction in turnover is in contrast to that seen in the previous survey which saw 13% of firms experiencing a decline.
Growth in use of AI
Artificial Intelligence is transforming the legal sector, with 65% of mid-sized firms now using AI, a significant increase from 24% in 2024. The report highlights that AI is being leveraged for contract analysis, legal research, and predictive modelling, enhancing productivity and efficiency and leading to increased growth and profitability.
“The legal profession is undergoing a transformative period, with technology and AI driving unprecedented changes in how firms operate. While AI offers immense potential to enhance productivity and efficiency, it must be implemented thoughtfully to ensure alignment with professional and ethical standards. Firms that embrace innovation while maintaining strong client relationships and ethical practices will be best positioned to thrive in this evolving landscape.”
Robert Blech, head of Professional Practices at MHA
Looking Ahead
The report underscores the need for mid-sized law firms to adapt to a rapidly evolving landscape. From embracing AI and external investment to addressing workforce challenges and refining office strategies, firms must innovate to remain competitive.
"As mid-sized law firms navigate rising costs, regulatory pressures, and the growing interest from private equity investors, strategic planning and due diligence are more critical than ever. By embracing technological advancements, adapting to evolving market dynamics, and seeking expert guidance, firms can turn challenges into opportunities and position themselves for sustainable growth in 2026 and beyond."
