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How AI Companies Are Acquiring Law Firms

 

 

There have truly been some astonishing deals in recent months, and they signal not only record-setting investment flow but also a transformation in the partnership/ownership in law firms. LegalTech isn't just selling legal software anymore; it's buying law firms. Unlike other legaltech trends, this isn’t just hype; it’s a strategic reshaping of an entire market.

 

 

VC capital and LegalTech startups are now acquiring law firms, blending tech and legal services to create hybrid, scalable models that compete with traditional practices. Unfortunately, the rise of AI has revealed a structural weakness in the practice of law, and that is the lack of automation where possible and a billing structure that doesn't focus on the product produced, but rather the hours "invested". AI companies want to bring efficiency to an archaic industry, and it will be interesting to see what modern law firms will look like after their entrance into the legal field, not as a software provider to the firm, but as owners. 

 

LegalTech companies have decided to fix a major drawback they have faced with their law firm client, and that's adoption. Decipite extensive data showing that law firms would benefit the most from AI, adoption even when the firms have paid for tools is dismal. I think we all saw that Reddit thread where employees were complaining about their firm purchasing Harvey and other AI tools and never using them. I think it has become obvious to LegalTech companies that there are structural issues preventing the use of AI in law firms and there just isn't any insentive to change the way law firms are run. Below are some examples. 

 

 

Case Studies

 

• Eudia launched Eudia Counsel in Arizona. It's an AI-augmented legal practice built to handle corporate contracts and M&A work, powered by venture capital in the nine-figure range. We don't have the exact figure.

 

• Lawhive, backed by Google Ventures, acquired Woodstock Legal Services in the UK. Embedding its AI assistant (“Lawrence”) directly into a traditional legal services practice.

 

• Covenant raised $4 million to build a hybrid AI-native firm focused on private markets

 

• Crosby raised $5.8M to scale AI-first contract review.

 

What’s revolutionary here isn’t the deal size, it’s the direction of integration. LegalTech is absorbing legal services, not just selling to them. I'm not spreading conspiracy theroies about the legal sector taking over the legal sector, but I am saying that law firms are going to look very different in teh near future and lawyers are going to have to lean more teach skills to keep up. I also want to highlight that this is different to the big four accounting firms trying to compete with law firms by offering legal services, or VC capital buying a stake in law firms, all of their attempts to absorb the legal industry failed. I think this will actually work, but the reasons for thinking that are a topic for another day.

 

 

Why Does This Matter won't this create more work and jobs in the legal services sector?

 

Traditional law firms have long resisted radical tech change, but evolving regulatory environments (e.g., non-lawyer ownership loosening in places like Arizona and the UK) now enable new entrants to buy and integrate services at the core. This creates:

 

• Faster adoption of AI workflows
• Competitive pricing
• New delivery models that erode legacy firm advantages

 

This trend is one to watch for attorneys, in-house counsel, and law firm partners alike.

 

 

What’s Driving the Surge?

 

Market reports suggest a few common themes fueling this deal activity:

 

• AI-Driven Competitive Advantage. AI isn’t just a buzzword, it’s reshaping strategic logic in M&A. Companies are buying technology capabilities before competitors build them.
• Private Equity & Venture Capital Flow. VC funding (e.g., the $3.5B poured into LegalTech in H1 2025) fuels not just startup growth, it enables acquisitions and new service models.
• Regulatory Shift. New rules around non-lawyer ownership of legal firms, cross-border fintech licensing, and AI specialization create structural opportunities for deals.
• Sector Polarization. Much of the M&A activity is concentrated at the top of markets, global players with deep pockets, while smaller, nimble companies become acquisition targets or strategic partners.

 

 

The Strategic Takeaway

 

We are no longer in a world where small LegalTech firms sell software to incumbents. We’re in a world where LegalTech firms are acquiring incumbents. Legacy firms are either agreeing to partnering or getting disrupted. The era of “build vs buy” is giving way to buy to scale and integrate. The future will be shaped by who moves first and who moves boldly.

 

My thoughts,

The Legal Engineer