The African legal services market stands at a critical inflection point.

With the South African legal market projected to grow from USD 2.7 billion in 2024 to USD 4.1 billion by 2030, representing a compound annual growth rate of 7.1%, and the broader African legal services sector expected to expand from USD 30.598 billion in 2025 to USD 41.577 billion by 2033, opportunities abound.

Yet paradoxically, small and medium-sized law firms across the continent find themselves increasingly squeezed by cost pressures that threaten their very survival.​

The fundamental challenge facing SME law firms is the inverse relationship between firm size and unit costs. Over the past decade, the average law firm size has increased from 12 to 17 lawyers, a 42% expansion driven partly by firms seeking economies of scale.

This consolidation trend accelerated dramatically, with law firm mergers increasing by 23%, from 99 reported combinations in 2021 to 122 in 2022.

These numbers reflect a harsh economic reality: smaller firms simply cannot achieve the cost efficiency necessary to remain competitive in today’s legal marketplace.​

Professional indemnity insurance exemplifies this cost disparity. When examined on a per-lawyer basis, insurance premiums are significantly higher for smaller practices. The differential is stark, increasing coverage from R1 million to R2 million adds only 20-30% to total policy costs, yet smaller firms struggle to absorb even baseline premiums that larger competitors spread across dozens of fee-earners.

In South Africa, newly qualified lawyers face mandatory professional indemnity requirements through the Legal Practitioners Indemnity Insurance Fund, but this provides only limited primary coverage, forcing firms to purchase top-up policies that can become prohibitively expensive for solo practitioners and small partnerships.​

Infrastructure costs present another insurmountable barrier. Rent, technology systems, support staff, and back-office functions represent fixed costs that don’t scale proportionally with firm size.

A firm with five lawyers pays almost the same for practice management software, case management systems, and cloud infrastructure as a firm with fifty lawyers.

When spread across revenue, these fixed costs consume a far larger percentage of turnover for smaller practices.

Merged firms can consolidate office networks, reduce rental expenses, share IT systems, and centralise back-office functions across a larger revenue base, dramatically improving cost-to-income ratios.​

The Nigerian legal market, valued at USD 5.59 billion in 2024 and projected to reach USD 8.51 billion by 2033 at a 4.82% CAGR, offers immense growth potential. Similarly, Egypt’s legal services sector is expected to expand from USD 10.17 billion in 2024 to USD 15.66 billion by 2033, representing a 4.91% CAGR.

Capturing this growth requires investment capital that SME firms struggle to generate.

Larger, consolidated firms can reinvest profits in business development, marketing, technology, and talent acquisition at scale that smaller competitors cannot match.​

The data reveals that law firm consolidation is not merely a defensive strategy, it’s an offensive competitive advantage.

Building scale through mergers allows firms to assemble bigger benches of experts in particular practice areas, deliver increased economies of scale, and create more firepower to compete for sophisticated work. This becomes particularly important as clients increasingly demand full-service capabilities and national or regional coverage.

Insurance composites, for example, are explicitly seeking national, full-service firms with leading individuals offering regional support, a demand that solo practitioners and small partnerships cannot do.

Cost pressures extend beyond insurance and infrastructure to encompass talent costs. The “rule of thirds” suggests that healthy law firm economics allocate 33.3% of revenue to lawyer salaries, 33.3% to overhead expenses, and 33.3% to profits.

Smaller firms struggle to maintain this balance, often sacrificing profitability to retain talent or losing talent to better-resourced competitors who can offer superior compensation packages and career development opportunities.

Merged firms can offer clearer career paths, better training programs, and more competitive remuneration by spreading talent development costs across a larger base.​

The mathematics of profitability favour scale. A healthy profit margin for law firms generally ranges from 30-40% of revenue. Achieving this margin requires ruthless efficiency in cost management.

Top 10 UK law firms maintain net profit margins of 38.9%, while firms ranked 51-100 achieve only 23.7% margins.

The difference lies primarily in their ability to leverage economies of scale, invest in efficiency-driving technology, and spread fixed costs across larger revenue bases.​

For African SME law firms, the strategic imperative is clear: grow through acquisition or risk being acquired by more aggressive competitors.

The alternative, attempting to compete independently against firms with superior cost structures, is a path toward declining margins, reduced competitiveness, and ultimate obsolescence.

The continent’s legal market is growing at healthy rates across all major jurisdictions, but this growth will accrue disproportionately to firms that achieve the scale necessary to operate efficiently in an increasingly cost-conscious environment.

Consolidation offers SME firms immediate access to expanded cost-sharing opportunities, improved bargaining power with vendors and service providers, and the financial resilience to weather economic volatility.

In a market where the biggest firms continue to pull away from mid-tier competitors through superior economics, the question for SME law firms is not whether to consolidate, but with whom and how quickly.

Speak to us, we are in the middle of a client project to buy law firms.

Rob, rob@thegrmgroup.com

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For more please go to robgreen.substack.com