New data from Citi’s Law Firm Group shows that
law firms pursue mergers at a faster pace as demand growth remains weak. Demand for legal services continues to rise, but only slightly. This slow expansion pushes many firms to seek scale and stability through consolidation. Citi’s survey, which reviewed more than
200 U.S. law firms, including about 80 of the 100 largest, paints a clear picture. The industry faces uneven demand and rising costs, creating pressure for firms to find new ways to stay competitive.
Modest Demand Growth Pushes Law Firms to Pursue Mergers
During the first nine months of 2025, overall demand increased by just under 2%. Many firms raised billing rates by nearly 10%, but that growth did not solve the core issue. Rising costs and inflation continue to reduce margins. For firms that depend on steady client activity, even small dips in demand can create challenges.
Gretta Rusanow, head of advisory services for Citi’s Law Firm Group, said the slow demand environment is driving consolidation. When organic growth stalls, firms look outward for expansion. As a result,
law firms pursue mergers to broaden their services, reach new markets, and strengthen their competitive position.
Law Firms Pursue Mergers as Deal Activity Rises
Citi’s research shows a clear increase in mergers. In the first three quarters of 2025, the market saw 47 law firm mergers. This already exceeds the 43 mergers recorded during the same period in 2024. Many of these combinations reflect strategic growth plans:
- McDermott Will and Emery’s combination with Schulte Roth and Zabel strengthens several key practices.
- Herbert Smith Freehills and Kramer Levin aim to improve global integration and expand corporate and litigation capabilities.
- Perkins Coie and Ashurst seek a wider international platform.
Legacy firms, including Cadwalader, Wickersham and Taft, have also explored merger options. Partner departures and financial pressures often accelerate these decisions. These moves reinforce how aggressively
law firms pursue mergers when demand growth alone cannot support long-term goals.
Talent Strategies Shift as Law Firms Pursue Mergers
Citi’s report also highlights major workforce changes. From 2019 to 2024,
78% of firms increased associate hiring. Nearly three out of four firms added income partners. Many firms still plan to grow their lawyer headcount over the next two years.
Yet hiring patterns are changing.
Fewer firms plan to expand summer associate classes or entry-level hiring. Instead, firms focus on experienced lawyers who can contribute immediately. This approach supports the merger trend. When law firms pursue mergers, they need skilled attorneys who bring specialized knowledge and client relationships.
This shift reflects pressure from both clients and technology. Clients want efficiency and expertise. At the same time, automation reduces the need for large junior teams.
AI Adoption Reinforces Why Law Firms Pursue Mergers
Generative AI is reshaping how firms operate. Citi’s report shows that most large firms expect AI to change staffing models. AI improves efficiency in research, document review, and routine drafting. While this does not eliminate junior roles, it changes them.
Because of this shift, firms invest more in seasoned lawyers. They also look for broader practice depth. Mergers help firms secure that strength. As law firms pursue mergers, they gain access to larger, more diverse talent pools. This supports their ability to meet rising client expectations in an AI-driven environment.
Some Practice Areas Continue to Thrive
Although overall demand is slow, several practice areas show strong performance. Litigation, restructuring, infrastructure, and investment management remain active. These areas help firms offset weaker performance in transactional practices such as M&A and capital markets.
Rusanow emphasized how these patterns show the lasting importance of outside counsel. Even during uncertain economic conditions, clients still need legal advice for regulatory issues, financial stress, and long-term development projects.
More Growth Ahead as Law Firms Pursue Mergers
Citi’s data suggests merger activity will remain strong into 2026. Many firms face rising operating costs, slow demand, and intense competition. Consolidation offers a path to stability and growth. For that reason, law firms pursue mergers to increase scale, diversify their services, and strengthen their position in a changing market.
As more firms explore combinations, the
legal industry is likely to see its most significant structural changes in years. The next wave of mergers may reshape the competitive landscape and redefine what it means to succeed in today’s legal economy.
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