Legal Technology: Cloud Adoption Driving M&A Opportunities

Key Learnings 

• Cloud adoption is becoming increasingly urgent and accelerating across legal services, driving expansion of the legal technology space. 

• In the next several years, we expect to see a significant turnover of software solutions, presenting challenges for longstanding incumbent software vendors. 

• Substantial value-creation opportunities exist for platforms able to build or deliver end-to-end, fully integrated cloud solutions with seamless customer experiences. 

• As cloud adoption continues to rise, we anticipate that more small and innovative players will enter the market, representing increasing consolidation opportunities across the sector. 

The legal sector has historically been slow to adopt cloud-based technology, despite access to a broader solution ecosystem, improved security, lower TCO, and other key benefits. However, with emerging trends causing cloud adoption to become more of an imperative, law firms have accelerated their cloud journeys. 

Here, senior bankers from the Harris Williams Technology Group and Business Services Group share what’s driving more rapid cloud migration across legal services, and how it’s creating growth opportunities in the legal technology space.

Trends Pushing the Pace of Cloud Migration

Due to several powerful trends, the legal services segment is now reaching a tipping point in its urgency for cloud technology. For instance, the pandemic and subsequent shift to hybrid work created an immediate need for law firms to prioritize cloud access. “By switching to cloud solutions, law firms can create efficiencies and offer flexible work environments that are fully accessible at home, on the go, or in the office at any time and from any device,” says Tsui.

Meanwhile, the competitive environment has intensified, with higher customer expectations and more providers entering the space and recruiting talent. “To improve their services and offer a better client experience, law firms must be able to integrate their tech stack and link all their solutions together in a cohesive ecosystem,” notes Walker.

Hierarchies within law firms are also changing, often moving toward more traditional C-suite structures featuring tech-focused executives. With these internal stakeholders in place, cloud technology is a higher priority and being implemented at an accelerated pace.

Monjauze adds that advancements in cloud tech have now enabled providers to navigate country-specific rules. “Legal tech players can now collect and store data in different states and countries based on geographic specificities, which was previously a major hurdle for law firms to move to the cloud,” he says.

These factors have led legal services companies to fully dedicate themselves to cloud adoption, especially at the top end of the market. Tsui explains that this newfound commitment to the cloud has pushed the legal tech subsector to grow at a rapid trajectory: “It’s a space hungry for innovation with pent-up demand, which is creating new players, more investor interest, and valuable M&A opportunities.”

A Space With Pent-Up Demand and a Rapid Trajectory

Strong trends are accelerating cloud migration across the legal services space, which in turn is generating growth in legal tech and increasing demand for best-in-class tools. Innovative platforms that can establish all-in-one solutions with top-notch customer experiences will be positioned to capture market share quickly and win long term. 

To learn more, please contact our senior bankers. 

Harris Williams Technology Group

Technology is ubiquitous in today’s economy, with nearly every sector of the economy rapidly adopting software as part of digital transformation and modernization initiatives.

Our Technology Group has deep knowledge and expertise across application software / SAAS as well as internet and digital media, and specific domain expertise within numerous software verticals. 

Harris Williams Business Services Group

The business services landscape is fast-moving, dynamic, and diverse, and serves a rich variety of end markets. Our Business Services Group has a longstanding track record of working with companies across sectors within the commercial and industrial services, specialty distribution, professional and tech enabled services, and IT services segments.