UK LegalTech witnessing significant M&A deal flow – what's happening and why?
- 12 LegalTech M&A transactions so far in 2020
- New BCMS report analyses key factors driving business sales
- Further M&A activity in the sector anticipated
Legal Technology (‘LegalTech’) addresses a substantial legal services market in the UK, estimated to be worth £37bn in 2019*. Broadly defined as any technology used to provide a legal service, this specialist sector has seen significant M&A activity of late, with 12 deals having already been completed in the first nine months of 2020, including a notable uptick in deal flow through the Covid-19 pandemic.
These transactions have ranged greatly in size, from Clarivate’s transformative near-$7bn acquisition of CPA Global in July, to much smaller 'bolt-on' acquisitions in the sub £10m deal value segment. Somewhat bucking the trend, this level of activity is in stark contrast to many other sectors, in what has been a very challenging time for the global economy.
So what is driving this? In a new report BCMS takes a closer look at some of these transactions, including its own role as lead advisor to the vendors in the sale of DPS Software to The Access Group, along with a discussion of the main factors behind the growth in take-up within LegalTech in the UK.
The report also offers evidence-based analysis on the sub sectors within LegalTech that are likely to attract the most attention from investors in the medium term.
Executive summary – a changing marketplace
Despite the size of the legal services market, LegalTech adoption has actually been significantly slower than other verticals, most notably Financial Technology ('FinTech') within the Financial Services sector. However there is clear evidence that the pace of adoption within LegalTech has been accelerating, as a result of four key factors:
- Changing partner demographics – digital natives are now in senior positions, embracing new solutions
- Evolving client demands – the drive for increased efficiency and reduced costs has created a growing market for innovative LegalTech platforms
- Business-critical functionality – the pandemic has ensured remote working solutions are no longer simply ‘nice to have’, but are now operationally essential for all law firms
- Market-tested technology – hosted solutions are now proven in the field, and their resilience, compliance and data security performance beyond doubt
With detailed analysis based on the deals that have been completed so far in 2020, the report discusses the key themes at play – including acquirer and vendor rationale – and offers clear insight into the factors driving activity into 2021 and beyond.
It’s essential reading for all business owners in the LegalTech market, including those considering their options over the next few years.
* ResearchAndMarkets.com, The UK Legal Services Market Report 2020