Trends in law firm mergers: The mid-tier movement

This positive momentum has continued into the first half of financial year 2025. Key performance indicators reinforce the sector’s robust trajectory: demand rose a further 4.6 per cent year on year, worked rates climbed 4.9 per cent, and total fees worked surged by 9.2 per cent, underlining sustained client engagement. Meanwhile, lawyer utilisation increased, and headcount rose by 4.7 per cent, highlighting firms’ confidence and their ongoing investment in talent to meet evolving market demands.

There is, however, a clear divide emerging between the big six firms and their mid-tier counterparts, one that extends beyond purely revenue figures. The same Thomson Reuters report noted that clients of BigLaw firms increasingly favour international firms, potentially due to their perceived depth of expertise and cross-border capabilities.

In conversations with senior leaders from BigLaw and global firms, cross-jurisdictional collaboration with international partners has emerged as a priority, backed by significant investment. At the same time, top-tier firms face mounting pressure from clients wary of escalating costs. This opens the door for mid-tier firms to capitalise on the strong domestic market, particularly in government and local corporate work.

Many mid-tier firms are evidently leaning into this and experiencing tangible growth, both in partner headcount and revenue. A recent Macquarie Business Banking survey revealed that 22 per cent of small-to-medium firms now generate more than $20 million in annual revenue.

It seems an obvious point to make, but to supply this increasing demand, the legal services model requires scale, service, and/or regional diversification – aka more fee earners in areas of need. Having experienced one of the tightest talent markets we have seen over recent years, as market confidence returns, many firm leaders noted a balancing of the employment market, while top talent remains tight. Firms, therefore, are turning attention to acquiring entire teams, or snapping up smaller firms under their banner.

VIEW ALL

Recent data points to an uptick in mergers, particularly among mid-market firms. In contrast, the big six and international tier-two firms are often too large to pursue mergers without running into significant conflict risks. These larger firms have the added complexity of a global expansion strategy, perhaps reducing their appetite for Australian domestic consolidation, begging the question: is the current Australian presence enough to satisfy their global footprint and agenda? This leaves a robust cohort of ambitious, mid-sized Australian firms actively pursuing growth through strategic combinations.

Notable recent examples include Hicksons merging with Hunt & Hunt NSW, and Pragma Lawyers joining Gramercy Legal in Western Australia. These mergers demonstrate clear strategic alignment to region and client synergy.

In other cases, what may appear opportunistic from the outside is, in fact, tightly aligned with long-term strategic planning. Conversations with leaders from HopgoodGanim Lawyers, Gadens, and Thomson Geer underscored this point. Collectively, these three firms accounted for over 10 mergers or team acquisitions in the past 12 months, representing a significant share of recent market activity.

Adrian Tembel, chief executive partner of Thomson Geer, highlighted the appetite for growth among mid-tier firms: “There are a number of ambitious firms competing for domestic market share, and larger mergers in the mid-market make strategic sense.”

He noted that for firms with fewer than circa 150 partners, mergers remain a viable pathway to achieve non-organic scale. “The larger the merger, the more complex it becomes. You run into conflict issues, and human alignment becomes critical. These factors can slow or even derail the process,” he said.

Tembel affirmed that Thomson Geer is “always open to change,” but added: “We look for targeted opportunities that align with our position as a challenger to the top-tier.”

The recent acquisition of the Commonwealth government team and Canberra office from top-tier global rival, *Ashurst, this month highlights the transfer of domestic opportunities that don’t align to the global growth strategy of a firm such as Ashurst. It does, however, fit neatly into the growth strategy for Thomson Geer.

Luke Mountford, managing partner at HopgoodGanim Lawyers, echoed a similar approach: “Knowing our client strategy, the first question we ask is, ‘will this acquisition or merger enhance and enable that strategy?’ If it doesn’t clearly align with our five client pillars, it’s a non-starter.”

Both leaders emphasised a blended growth strategy that balances mergers with strong organic development. A central theme in all conversations was scale; firms that aren’t growing risk losing their competitive edge in key markets or service lines.

Gadens’ Mark Pistilli, CEO and managing partner, concurred that mid-tier firms have a strategic advantage within the domestic market.

“Much of the legal literature talks of the existential threat being faced by smaller and state-based law firms, and many of them are certainly falling down the tiers. Firms like Gadens, historically classed as ‘mid-tier’, have an opportunity to reshape and lead the market,” he said.

The merger of law firms is a global trend that is being replicated in several countries, including here in Australia. This is occurring to meet client demands (national firms matching the footprint of their clients) and to reap the benefits of scale.

Pistilli said: “Larger firms have more leverage in pricing, attract the highest quality work and people, can afford the best technology and tools used by lawyers – and are just more relevant.”

For firms contemplating mergers as part of their growth journey, a thoughtful, strategic approach is essential. Tembel said: “Ground rules must be set early to minimise post-merger complexity. Ambition should never cloud judgement; cultural and client alignment must come first.”

Mountford also highlighted the importance of cultural integration and detailed planning. “Sound integration plans are critical. They set both incoming and existing teams up for success,” he said.

Pistilli also cautioned that growth must be strategic: “Firms that just aggregate lawyers without a strategy – so-called ‘hotels for lawyers’ – may get the scale, but they won’t get all of the benefits which come with it.

“Scale must be tied to a clear strategy, and ours is to be a collegiate, modern, and sophisticated law firm which places Australia at its core – following capital into Australia and supporting Australian people, communities, organisations, governments, and businesses. Anyone coming into Gadens, by merger or otherwise, must have a similar approach and ambition.”

Key considerations for firms include:

• Cultural compatibility: Aligning values, leadership styles, and firm cultures ensures smoother integration and boosts morale.
• Client retention: Assess client compatibility and protect existing relationships through proactive communication and service continuity.
• Operational synergy: Evaluate systems, processes, and management structures to avoid disruptions and realise operational efficiencies.
• Regulatory compliance: Ensure a deep understanding of all relevant legal and regulatory requirements.
• Talent management: Retain key personnel with clear communication and thoughtful planning around roles, redundancies, and development.

The Australian legal market presents exciting opportunities for growth, particularly for mid-tier firms willing to pursue mergers with clarity and purpose. By prioritising strategic alignment, cultural fit, and operational readiness, firms can position themselves for enduring success in a dynamic and competitive landscape.

Kim Wiegand is the founder of Julip Advisory.

Lawyers Weekly will host the Partner Summit on Thursday, 12 June 2025, at The Star, Sydney, at which speakers will address the range of opportunities and challenges for partners and partner equivalents, provide tips on how they can better approach their practice and team management, and propel their businesses towards success. Click here to book your tickets – don’t miss out! For more information, including agenda and speakers, click here.