Demystifying M&A for mid-sized firms

On the surface, the UK legal sector shares many similarities with industries such as accounting and insurance. They are all professional service sectors, largely populated by small to medium-sized, owner-managed companies, with a handful of larger market leaders.

They are also, to varying degrees, highly fragmented industries in which smaller companies are struggling to achieve organic growth, whilst also contending with the need to tap into emerging technologies and meet ever growing client expectations.

However, while insurance and, in particular, accounting have seen soaring levels of M&A activity over recent years - with many firms focusing on acquisitions as their main route to growth and numerous private equity-backed businesses seeking to capitalise on the scope for consolidation - the legal sector has remained something of an outlier.

While activity has been increasing over the past couple of years and is predicted to grow further still, it remains slow in comparison to analogous sectors, following a decade from 2010 - 2020 in which dealmaking declined sharply.

Furthermore, acquisitive appetite within the sector seems to be most apparent among larger firms - with small and medium-sized businesses seemingly prioritising organic growth strategies, despite the many upsides of M&A driven growth.

A recent study suggested that, rather than being a pure strategic choice, this hesitancy may result from smaller companies simply not knowing how to proceed with acquisitive growth. This is something that first time buyers across any sector can likely sympathise with.

Across the UK, thousands of small and medium-sized businesses are seeking to attain growth following years of challenging trading conditions. For those targeting rapid, transformative and sustainable growth, M&A is perhaps the best option – enabling companies to rapidly add new capabilities, bolster their service offering, expand geographically and add scale to their business.

According to several forecasts, these factors are set to see mid-market deals dominate a resurgent M&A market during 2025, with medium-sized firms set to emerge as both a highly active buyer class and a particularly attractive acquisition profile for buyers such as private equity firms.

However, in the legal sector and beyond, many small and medium-sized firms will have little to no experience in conducting M&A deals and may have concerns and misconceptions that could make them hesitant to target deals or even decide against pursuing them entirely.

While M&A may not be the answer for all businesses, it is the quickest, most effective way to secure growth and, in many instances, can be vital for companies seeking to keep up with the rapid pace of change in their industries.

In other words, for some companies, whether or not they explore M&A opportunities could be the difference between establishing themselves as an upward-bound leader in their industry, or being left behind by their competitors.

And let’s not forget one of the chief motivators to accelerate profit growth through acquisition - a considerably higher enterprise value. That’s because the average multiple of EBITDA achieved on sale of a larger business is much higher than for smaller businesses. Whereas a tidy business with EBITDA of £500,000 could expect to sell for perhaps £1.5m to £2.2m, a well-run company with 4x this EBITDA (i.e. £2m) could expect to sell for a multiple of around 6 (i.e. £12m). Obviously, multiples differ across industries, influenced by factors such as market demand, growth potential, and economic resilience.

The legal sector – Are mid-sized firms hesitant buyers?
The UK legal sector is a highly fragmented industry (the Solicitors Regulation Authority (SRA) putting the number of solicitors firms at close to 9,200 as of January 2025) that has seen increasing levels of M&A activity over recent years, following more than a decade of slow dealmaking.

All the indications have been that this upward trend in activity will continue over the coming years, led by consolidators such as Lawfront and the increasing involvement of private equity firms.

Indeed, a recent PwC survey of the UK’s 100 largest law firms showed that M&A was a key priority in 2025, with 60 per cent of respondents targeting acquisitions to build geographic scale and 58 per cent saying they were seeking to add to their practice areas or service lines.

Competition among the top firms to improve or expand their service offering, incorporate new technologies and build more comprehensive geographic coverage should continue to push consolidation in the sector over the next few years.

However, another recent survey suggests that this wave of legal M&A might not include the medium-sized firms that make up the majority of the sector. In a poll of 64 mid-sized firms by MHA in association with the Law Society, just 17.2 per cent said that they were considering a merger or acquisition over the coming year, while just 13 per cent had engaged in M&A over the past year.

Instead, the majority of the companies polled (in what is admittedly a small sample size) were targeting organic growth through, for example, expanding their internal talent pool, bolstering productivity and geographic expansion (80 per cent said they were seeking to either open a new office or expand in a new or existing location).

MHA partner Karen Hain commented: "The low percentage of firms looking to grow through M&A is interesting, bearing in mind the legal market is still highly fragmented compared to other professions and because a merger provides a short-cut to growth.”

According to Hain, MHA anecdotally feel that a reluctance to pursue acquisitive growth may not result entirely from a strategic decision to prioritise organic growth, but rather uncertainty over how to proceed with M&A.

Hain says that mid-sized firms may not know “where to start with a merger or how to identify targets”, whilst also suggesting that owners may be reluctant to dilute control through M&A.

Hain describes this state of affairs as a “stark contrast” with the accountancy sector – a sector similarly dominated by smaller companies and that is also highly fragmented, but sees far higher levels of M&A activity than the legal sector.

Hain continued: "The firms that are exploring mergers and acquisitions to accelerate growth have identified specific service lines to prioritise over the next 12 months with a strong emphasis on tapping into niche markets, for example private client work is a common sector firms have highlighted in their plans."

Major barriers to growth cited in the study, meanwhile, include recruitment and staff development and rising costs, while key priorities are identified as updating IT systems and bolstering ESG credentials.

The disparity in how many mid-sized firms are considering M&A in comparison to their larger counterparts suggests that bigger firms are far more likely to use acquisitions to achieve their goals and – potentially – more confident overall in pursuing deals.

The motivations cited for pursuing both organic and acquisitive growth, however, are similar to some of those identified by the larger firms polled in PwC’s report – geographic growth, service offering expansion and attaining new technology. Meanwhile, the challenges facing smaller firms and their key areas for improvement (ESG and technology) are all things that can potentially be achieved through M&A.

The lack of medium-sized firms that are even considering M&A as part of their growth strategies raises concerns that many will be unable to achieve their goals in a timely manner and could mean that the gulf between medium-sized firms and the bigger industry leaders grows even wider.

Myths and misconceptions
Holding misconceptions about dealmaking can be extremely offputting for potential buyers – particularly those that have never previously engaged in M&A activity. While M&A does of course pose significant challenges, as well as considerable risks, small and medium-sized firms shouldn’t be put off due to unfounded concerns.
M&A is for big companies

The most striking takeaway from the PwC and MHA polls of legal sector businesses was the disparity between how many larger companies are considering M&A compared to medium-sized firms.

This gulf in acquisitive sentiment points to one of the most persistent myths about dealmaking – that it is a form of growth that is mainly reserved for bigger companies and is far harder for smaller companies to engage in.

Looking at much of the major media coverage of M&A, it’s not hard to see where this myth comes from. Media coverage of dealmaking is, naturally, dominated by stories of mega M&A deals involving huge, well-known businesses and vast sums of money.

It is true to some extent that the scale and wealth of big companies makes many elements of the M&A process easier. However, it is also true that bigger companies will find it harder to achieve truly transformative growth through M&A than smaller businesses.

In reality, M&A is used by businesses of all types and sizes to build scale, improve and diversify their product or service offering, move into new sectors, expand geographically and incorporate new technologies.

This includes small and medium-sized companies, for whom acquisitions can be truly transformative. Providing companies follow a careful M&A process through to integration, have access to the requisite funding and are able to structure deals in a way that works for them, then there is no reason why they cannot create value and grow.

Acquisitions need to be perfect
For some first-time buyers, one of the biggest factors that may delay or prevent them from making an acquisition is a misconception that they need to find the “perfect” business for them and that it would be better to not make any acquisitions than to acquire a business that doesn’t exactly fit their specifications.

The problem with this approach is that the perfect business doesn’t exist. All businesses – and all acquisitions – come with challenges and risks that need to be identified, mitigated and resolved. It’s just an inherent part of the process and one that anyone involved in M&A needs to be prepared for.

While it is certainly important to have a well-developed acquisition profile to ensure that your search isn’t overly broad and you’re not focusing on businesses that are patently unsuitable for you, insisting that any potential acquisitions must absolutely fit a preconceived model is simply not workable.

So, by all means, develop a detailed profile for your ideal acquisition target – but bear in mind that flexibility will be important. Be prepared to consider businesses that don’t exactly fit your model, but which might be a good strategic and/or cultural fit and will help you to achieve your growth ambitions.

In a nutshell – don't let your hunt for the perfect business mean you miss out on the right one.

It’s impossible to secure financing
Obviously, acquisitions are expensive ventures that should ideally be undertaken by businesses in a strong financial position, but this does not mean that they are inaccessible to smaller businesses that lack the financial clout of bigger firms.

In terms of financing, there are a range of options available to smaller businesses, ranging from traditional sources such as bank financing to the government’s Growth Guarantee Scheme – the latest iteration of the Recovery Loan Scheme and the previous Coronavirus Business Interruption Loan Scheme (CBILS).

Admittedly, however, these options present significant challenges. Bank financing conditions remain tight amid the UK’s ongoing economic uncertainty, while the Growth Guarantee Scheme remains a severely limited option in comparison to the equivalent loans available to US businesses.

There is also the private equity option. Private equity firms are sitting on huge sums of unspent capital that they are coming under increasing pressure to deploy, with widespread forecasts that investment activity will increase significantly in 2025.

The caveat is that PE firms will almost always be looking for a majority stake. The majority of private equity acquisitions in the small to medium sector are bolt-ons for other companies in their portfolio in fragmented sectors that are pursuing a growth by consolidation strategy.

Competition for private equity funding can be tough, and there are understandable concerns among many owners about private equity involvement in their businesses, particularly loss of control. However, PE investment can provide a medium-sized business with major acquisitive power, and also offer the business owner a chance for a 2nd, 3rd and even 4th exit down the line.

You need to pay the asking price
Another common misconception relating to the finance side of M&A is that vendors will typically insist on receiving nearly or all their asking price in cash.. However, there is almost always significant scope for negotiations, as well as creative deal structures to help lower the initial consideration.

There are numerous ways in which deals can be negotiated and structured in order to limit the upfront cost and even link the final purchase price to the post-acquisition performance.

There’s a widespread understanding that financing conditions are tough and many outgoing owners will be willing to be flexible on deal structure and price – within reason – in order to accommodate the right buyer.

Earn-outs are becoming increasingly common amid divergent buyer and seller valuations, meaning that buyers can pay a lower sum upfront and link some future payments to the performance of the business. In this way, buyers can limit the amount they need to raise in order to finance the upfront consideration of a deal, while limiting their financial exposure should the business underperform.

Another option is seller financing – a funding option in which the vendor extends credit to the buyer, with the purchase price repaid over time. While the terms of such a structure will necessarily be quite strict and extremely well-defined, seller financing can enable a buyer with less available capital to complete an acquisition, while opening up a wider pool of potential buyers to the seller.

I don’t have the skills and/or experience
For many businesses hesitant about making their first acquisition, it may come down to something as simple as a lack of confidence. Owners may be at ease running their own company, but could feel that they will struggle at extending this to a new business post-sale and during the transition period.

If a business is expanding into a new or adjacent sector, for example, such fears may be particularly pronounced – with owners potentially concerned about their lack of industry experience, along with their ability to manage a larger, more diverse team.

However, many successful acquisitions are made by businesses whose owners do not necessarily have any personal experience of the industry in which the acquired company operates. In successful owners and managers, there are often qualities that are more important than direct experience.

Transferable skills will be vital and can often help to bridge the gap between industries that, on the surface, couldn’t appear more different. Turning to the legal sector again, one of the sector’s most acquisitive companies is led by a CEO who originally plied his trade in a very different sector.

Prior to his appointment as CEO of Lawfront in 2022, Neil Lloyd had previously served as CEO of dentist group Dental Partners. While the two sectors are seemingly totally distinct, there are key similarities that made Lloyd the ideal appointment.

For one, much like the dental sector 15 years ago, the legal industry is highly fragmented. Furthermore, as Lloyd recently said in a conversation with BSR, companies in both sectors are operated by highly-educated, highly-motivated individuals who directly generate the business’ entire turnover.

The key transferable skill, however, was Lloyd’s experience at building a successful and extremely acquisitive consolidator – something that Lawfront are seeking to replicate in the legal sector.

There are also significant measures that can be taken to ensure that an owner becomes more comfortable with a new business in the post-sale period. Keeping hold of key personnel will be an invaluable boost, as will hiring trusted professionals with industry expertise to the leadership team.

Transition periods, in which the outgoing owner remains with the business for a pre-agreed period to help smooth the transfer of power, are also common, as are consulting agreements that enable the new owner to tap into their predecessors knowledge and experience.

Another common misconception relating to the transition period is that employees at the target company will be resistant to the change. While it is true that there is often significant staff turnover in the wake of an acquisition, buyers can help to ensure a smooth transition and a good start to the working relationship through strong communication and a well thought out integration plan. This will help to boost employee morale and, ultimately, staff retention in the post-deal period.

It’s too complex to source acquisitions
One of the potential hesitations cited in the MHA report was a feeling that mid-sized firms do not have confidence in their ability to identify acquisition targets. For many first-time buyers, the thought of trawling through vast lists of companies in an attempt to find an appropriate acquisition target may seem like searching for a needle in a haystack – and that’s before you even get to negotiations, exchanging documents and post-deal transition.

However, it doesn’t need to be this way. By refining your search, being clear about what size of company you are seeking to acquire (e.g. in terms of headcount or revenue), the sector you are looking in or the geographic area you are seeking to expand into, you can quickly come up with a streamlined list of potential targets.

First-time buyers may also feel that they can only target businesses that are actively seeking a sale and that any other business would not countenance an approach. In reality, owners will often be more accommodating to a serious offer than one might assume and off-market acquisitions are a relatively common occurrence.

First time buyers can use Business Sale Report to search businesses for sale, as well as our Off-Market Lens tool to source off-market opportunities.

M&A deals are too tightly regulated
There have been significant concerns voiced over recent years that the UK’s regulatory regime is becoming overly stringent, potentially leading to deals being unnecessarily scrutinised - even retroactively.

It is true that regulators will take an interest in any significant deals, particularly those in especially sensitive sectors, in order to probe the potential customer and client impacts, financials and other relevant factors.

In the legal sector for instance, law firm mergers come under the scrutiny of regulators like the SRA, and missteps can lead to sanctions or reputational damage. For instance, the SRA warns that rapid expansion without proper controls can lead to ineffective management and risks to clients .

However, while there are regulatory risks and hoops to jump through, these can be navigating by ensuring that compliance is a priority throughout the dealmaking process. A professional can be appointed to oversee for compliance, for example to ensure that SRA principles are upheld throughout (client confidentiality, handling of client money, etc.).

Providing that buyers are proactive in ensuring that they are compliant with the relevant regulations, there is no reason why a merger or acquisition will come under undue regulator scrutiny.

Acquisitions are disruptive
Many owners feel that acquiring businesses and integrating them into their own will risk disrupting their own operations. Maybe the IT systems are incompatible, perhaps there are huge cultural differences that will make merging difficult, or maybe there are unforeseen issues that have been missed during due diligence.

While it’s true that there is a risk of disruption during integration, this can be mitigated through a) watertight due diligence - to flag up any potential issues, and b) thorough pre-deal planning for integration - e.g. how systems and workflows will merge.

Owners should engage IT and operations staff (or consultants) early to map out integration steps. During integration, prioritise critical operations and plan for a transition period in which, for example, separate IT systems run in parallel as data is migrated. Testing new integrated systems before full roll-out can catch problems early.

Again, proactive steps and thorough preparation can help to ensure that there is a minimal risk of post-deal integration becoming overly disruptive to the merged business.


Naturally, there are significant risks and challenges associated with dealmaking. However, these are not insurmountable and owners who are truly focused on growth should not allow misconceptions to deprive them of the fastest, most reliable route to attaining it.

With careful planning, the right help and a clearly laid out strategy, there is no reason why small and medium-sized businesses can’t use M&A deals to accelerate their growth.

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