The legal industry remained steady through the third quarter of 2025, showing modest wage growth and limited changes in overall employment. While the Arizona Supreme Court’s recent proposal to allow non-licensed criminal representation has sparked debate nationwide, most law firm owners are focused on rising labor costs, technology adoption, and competitive pressures in retaining talent. At Lion Business Advisors, we’ve seen continued buyer interest in niche or specialty firms with recurring client bases and strong administrative systems, while firms reliant on hourly litigation work are facing slower growth and tighter margins.
Key Trends Affecting Law Firm Owners
Major Industry Development
In Q3 2025, the Arizona Supreme Court’s administrative office proposed allowing individuals without a law license to perform limited criminal law work, excluding capital cases. This unprecedented move aims to expand legal access in underserved areas and reduce barriers to entry for legal professionals. However, it has faced pushback from both public defenders and private criminal defense associations, who argue it could lower professional standards and increase appeal risks. If adopted, similar reforms may gain traction in other states, potentially reshaping the labor pool and altering how firms staff entry-level positions.
Employment and Wage Trends
According to Vertical IQ, overall employment at U.S. offices of lawyers increased 1.0% year-over-year as of July 2025, signaling relative stability in headcount. Over the past decade, employment in law offices has risen 6.9%, compared to 13.0% growth across all private industries. Meanwhile, wages for nonsupervisory legal employees climbed 2.6% to an average of $50.69 per hour. Over the last three years, wage growth reached 16.7%, outpacing the private sector average of 13.4%. In Texas, we continue to see wage pressure across both litigation and transactional practices, particularly in Austin and Dallas, where mid-sized firms compete aggressively for qualified associates.
Industry Forecast
Vertical IQ projects that U.S. law firm revenues will grow at a compounded annual rate of 3.43% from 2025 through 2029, slower than the broader economy. While growth remains steady, it reflects maturing demand and rising cost structures that could squeeze smaller practices. In Texas, many boutique and mid-sized firms are maintaining stable revenues but report tighter margins as they balance compensation, technology investments, and client pricing pressures.
Looking Ahead
The current M&A environment for law firms remains balanced, with active buyers showing interest in succession-ready firms that maintain steady cash flow and diversified practice areas. Private buyers and internal successors are the most common acquirers, while private equity remains limited to specialized legal services platforms. Buyers are placing premiums on firms with strong client retention, robust billing systems, and effective associate development programs. Firms lacking these fundamentals may find valuation multiples compressing as operating costs rise and revenue per attorney plateaus.
Looking ahead to early 2026, the law firm sector is expected to remain stable but competitive. Owners considering an exit within the next few years should begin preparing for succession now, whether through internal transition or an external sale, to ensure their firm commands full market value.
Lion Business Advisors’ quarterly industry insights incorporate data and trends sourced from internal deal flow and buyer activity, Vertical IQ, and market comparables from platforms such as Axial and BVR (Business Valuation Resources).
Industry Insight Report: Law Firms Q3-2025
The legal industry remained steady through the third quarter of 2025, showing modest wage growth and limited changes in overall employment. While the Arizona Supreme Court’s recent proposal to allow non-licensed criminal representation has sparked debate nationwide, most law firm owners are focused on rising labor costs, technology adoption, and competitive pressures in retaining talent. At Lion Business Advisors, we’ve seen continued buyer interest in niche or specialty firms with recurring client bases and strong administrative systems, while firms reliant on hourly litigation work are facing slower growth and tighter margins.
Key Trends Affecting Law Firm Owners
Major Industry Development
In Q3 2025, the Arizona Supreme Court’s administrative office proposed allowing individuals without a law license to perform limited criminal law work, excluding capital cases. This unprecedented move aims to expand legal access in underserved areas and reduce barriers to entry for legal professionals. However, it has faced pushback from both public defenders and private criminal defense associations, who argue it could lower professional standards and increase appeal risks. If adopted, similar reforms may gain traction in other states, potentially reshaping the labor pool and altering how firms staff entry-level positions.
Employment and Wage Trends
According to Vertical IQ, overall employment at U.S. offices of lawyers increased 1.0% year-over-year as of July 2025, signaling relative stability in headcount. Over the past decade, employment in law offices has risen 6.9%, compared to 13.0% growth across all private industries. Meanwhile, wages for nonsupervisory legal employees climbed 2.6% to an average of $50.69 per hour. Over the last three years, wage growth reached 16.7%, outpacing the private sector average of 13.4%. In Texas, we continue to see wage pressure across both litigation and transactional practices, particularly in Austin and Dallas, where mid-sized firms compete aggressively for qualified associates.
Industry Forecast
Vertical IQ projects that U.S. law firm revenues will grow at a compounded annual rate of 3.43% from 2025 through 2029, slower than the broader economy. While growth remains steady, it reflects maturing demand and rising cost structures that could squeeze smaller practices. In Texas, many boutique and mid-sized firms are maintaining stable revenues but report tighter margins as they balance compensation, technology investments, and client pricing pressures.
Looking Ahead
The current M&A environment for law firms remains balanced, with active buyers showing interest in succession-ready firms that maintain steady cash flow and diversified practice areas. Private buyers and internal successors are the most common acquirers, while private equity remains limited to specialized legal services platforms. Buyers are placing premiums on firms with strong client retention, robust billing systems, and effective associate development programs. Firms lacking these fundamentals may find valuation multiples compressing as operating costs rise and revenue per attorney plateaus.
Looking ahead to early 2026, the law firm sector is expected to remain stable but competitive. Owners considering an exit within the next few years should begin preparing for succession now, whether through internal transition or an external sale, to ensure their firm commands full market value.
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