Legal Tech Industry Moves Toward a Long-Expected Consolidation

The stage is set for a wave of legal tech consolidation long anticipated by industry founders, users, and investors.

The factors driving it are straightforward: Legal tech has more possible acquirers than ever, thanks to well-funded super startups with the desire to buy other companies. A jumble of small startups are clustered on the lower rungs of the legal tech ladder, many with little to distinguish themselves from others. And some smaller companies—and their investors—are looking to cash out.

“People are talking to me more about buying and selling than ever before,” said Joe Borstein, a partner at Baretz+Brunelle who advises legal tech companies on business strategy.

Some industry watchers predict there won’t be a thorough thinning of the herd until founders worry venture capital will be shut off. If investors stop giving more funding to smaller players, those companies will start to look for a way out.

A wave of M&A isn’t the only way legal tech could see a shake-up. Smaller companies can disappear without a buyer. Others will find jobs for their employees at another company. And a series of deals wouldn’t necessarily lead to fewer legal tech companies, because more startups are continuing to emerge.

Still, the sheer number of companies trying to make it in the legal tech space is pushing up against the realities of how lawyers want to work. They don’t want to use 10 different AI-for-legal platforms. They want to use one.

There are signs that a consolidation environment is emerging. Andrew Forman, an investment banker specializing in legal tech at TD Cowen, said he’s seen a 200% increase in legal tech deals crossing his desk this year compared to last year.

A surge of M&A doesn’t mean the industry is in trouble, he said.

“There will be a lot of M&A activity, and sure there will be some that flame out and need to find a home, but I think there’s going to be a lot more good M&A, I’d say strategic M&A, than people think,” Forman said.

Buyers on the Lookout

High-flying startups are using their venture funding to turn themselves into acquirers.

The AI-for-law firms company Legora recently said it acquired the legal research startup Qura. In March, it announced it acquired Walter AI just one day after unveiling a $550 million funding round. Clio, another law firm focused tech company, raised $500 million late last year and acquired the legal research company vLex for $1 billion.

The bigger indicator of growing consolidation, however, is what companies say they’re going to do next. Clio, in announcing its November funding round, said the cash positioned it for “strategic M&A.”

“You could certainly expect more acquisitions and more news from us on that front,” Clio CEO Jack Newton said in an interview.

Harvey chief operating officer Katie Burke has also suggested the company could be a buyer.

“We’re open to more acquisitions that make sense with our strategic road map,” Burke said in January after Harvey brought on engineers from the AI startup Hexus.

“Not Going to Make It”

Leaders at other legal tech companies said they’ve been getting requests from smaller companies reaching out for a buyer. Many of those companies are having a hard time standing out against their peers.

“There’s a large portion of companies that are struggling, even AI-first companies,” said Filevine CEO Ryan Anderson, who has received a number of those requests, sometimes directly from investors.

Anderson said Filevine is on the lookout for good products to acquire. Filevine announced it bought Pincites in January because Filevine’s engineers said it would take two years to build the contract redlining capabilities Pincites had, Anderson said.

Scott Stevenson, CEO of the AI-for-contracts company Spellbook, has also received multiple requests from companies looking for a buyer.

In other cases, acquisitions are about talent. Acquiring a small startup is often motivated more by a desire to bring on that company’s chief technology officer or CEO than it is about the startup itself.

“The war for talent in this space is really hot,” Spellbook’s Stevenson said.

Targeted Acquisitions

There’s a big difference between a major wave of M&A activity and a continued run of targeted transactions.

“I’m not convinced that you’re going to see large scale consolidation yet,” said Dru Armstrong, CEO of the business of law platform 8AM.

That’s in part because of AI. Coding tools like Anthropic’s Claude Code and OpenAI’s Codex have made it easier and cheaper to build new products and features, so some private equity investors backing legal tech companies are more interested in building than they had been before, Armstrong said.

Even when companies want to make acquisitions, “it’s hard in a market with so much uncertainty to know what to buy,” she said.

Consolidation is more likely in certain segments of legal technology than it is across the broad market, said Scott Mozarsky, co-CEO of JEGI LEONIS, an M&A advisory firm. Companies that make practice management software or contract lifecycle management tools struggle the most to differentiate themselves and are more likely to consolidate, he said.

Private equity backers of legal tech companies will play a major role in driving those transactions, Mozarksy said.

“There’s more and more private equity backed platforms and those private equity backed platforms want to do acquisitions,” Mozarsky said.

Consolidation would signal that the legal tech market has reached a higher level of maturity. But it won’t happen until investors stop dumping money into it, said Oz Benamram, a longtime Big Law innovation leader.

“It all depends on when is the market going to dry out,” Benamram said. “As long as they print Monopoly money and they sprinkle them all over everyone’s head, everyone believes they’re going to be the next Steve Jobs.”

Bloomberg Law is a legal technology provider.