The M&A LegalTech Boom

Richard Harroch
Fri, 31 Oct 2025 20:14:28 +0000
Artificial-intelligence, Artificial-intelligence-ai, Corporate-legal-departments, Legal, Legal-compliance, Legal-tech, M-a, M-a-preparation, M-a-transaction, Merger-acquisition, Mergers-acquisitions, Mergers-acquisitions-partnership, Tech-solutions, Technology-trends, Legaltech

LegalTech’s surge is reshaping how lawyers, law firms, and corporate legal departments operate—and it’s creating one of the most active M&A markets in tech. LegalTech companies provide software and digital solutions that help legal professionals work more efficiently and effectively.

Selling a company in today’s LegalTech market requires far more than a great product—it demands preparation, precision, and strategic insight. With investors pouring billions into AI-powered legal platforms and acquirers racing to modernize legacy systems, founders are navigating one of the most competitive deal environments in technology.

We sat down with Chris Rose, Managing Director at Marks Baughan, a leading investment bank specializing in LegalTech and compliance companies, whose professionals have completed more than 200 transactions with an aggregate value exceeding $30 billion, to discuss what’s driving the market and how founders can position themselves for standout outcomes.

Q: Why is LegalTech attracting so much investor and buyer attention right now?

A: The legal industry has been evolving for over two decades, but the pace of change has accelerated dramatically with the rise of AI. Large law firms that once relied on armies of associates for discovery, depositions, document review, and billing now outsource or automate much of that work through third-party vendors and legal tech platforms.

Inside corporations, general counsel have seen their responsibilities expand as businesses become more regulated and litigious; today, legal departments oversee compliance, privacy, and ESG across the enterprise.

Private equity firms have poured billions into legal and compliance tech platforms that modernize these functions. All of these forces were already reshaping the sector—then AI arrived, upending workflows and turning the legal market into one of the most dynamic arenas for technology investment today.

Q: How is artificial intelligence reshaping the LegalTech market?

A: AI is accelerating a deep structural shift in the legal industry. Administrative and document-heavy tasks that once supported legal advice are being automated, while corporate legal departments—with rising compliance and litigation workloads—are adopting workflow and analytics tools that never existed before.

Some recent and highly visible LegalTech unicorns—Harvey, EvenUp, Legora, and Clio—illustrate how quickly the market is scaling:

Harvey has raised over $1 billion of venture funding, with its latest valuation at $9 billion, rapidly becoming the preferred generative AI platform for global law firms.

EvenUp achieved a $2 billion valuation through consecutive late-stage rounds, using AI to automate plaintiff-case preparation and claims valuation.

Legora achieved a $1.8 billion valuation through consecutive late-stage rounds, using AI to streamline complex legal workflows.

Clio/vLex–Fastcase combined practice management with global legal research in a $1 billion deal, uniting workflow and intelligence under one cloud ecosystem.

Each demonstrates how LegalTech has moved from incremental efficiency gains to true platform transformation—where AI isn’t just supporting lawyers but redefining how legal services are created, priced, and delivered.

Q: In LegalTech, who has the advantage—the incumbent platforms or the new, AI-native challengers?

A: It’s a fascinating dynamic, and in vertical markets like legal, the real opportunity often lies in collaboration rather than competition. The incumbent players have what every AI startup needs: entrenched customer relationships, embedded workflows, and trusted data ecosystems. The AI-native companies, on the other hand, move faster and innovate at a completely different pace.

When the two work together, the results can be transformative. A native AI provider can accelerate its market presence and annual recurring revenue (ARR) by leveraging an incumbent’s distribution, content, and integrations—instead of spending years and capital trying to replicate them. We’re starting to see that play out across the sector, and it’s creating some of the most compelling deal opportunities we’ve seen in years.

Q: Can you share an example of a recent transaction that illustrates this transformation?

A: A great example is our work with Casetext, a pioneer in applying AI to legal research and drafting. We advised the company on its $25 million Series C financing, which enabled it to expand rapidly to meet soaring demand from law firms seeking AI-powered solutions.

Casetext’s technology was so advanced that its CoCounsel platform, powered by GPT-4, became the first AI system to pass both the multiple-choice and written portions of the Uniform Bar Exam—a striking proof point of how capable generative AI has become in legal reasoning and writing.

Eighteen months later, Thomson Reuters recognized the opportunity to combine its vast Westlaw content with Casetext’s cutting-edge AI technology. We advised Casetext again on its $650 million sale to Thomson Reuters—a landmark transaction that underscored exactly how established incumbents and AI innovators can create far more value together than either could alone.

Q: Many founders think they can manage a sale or capital raise on their own. What do they often underestimate about the process?

A: They underestimate the level of preparation and discipline required. Once multiple bidders enter the process, every data point in your materials will be scrutinized—financials, KPIs, customer contracts, projections, you name it. All of that information must be fully scrubbed, internally consistent, and defensible under diligence.

Having advised on hundreds of transactions, we know exactly where investors and buyers will push back and how to make sure a company is bulletproof before diligence begins. That preparation not only protects credibility but also keeps competitive tension alive when it matters most.

Q: What mistakes do you see tech companies make in the M&A process?

A: The biggest mistakes come down to preparation and process. Many companies underestimate how rigorous buyer due diligence will be.

Another common shortfall is presentation. A compelling, well-structured pitch deck is critical—it should clearly communicate your value proposition, market positioning, and growth potential.

Equally important is running a competitive process—whether broad or tightly focused. The key is to engage the right mix of potential buyers to create real tension and optionality.

One of the biggest mistakes sellers can make is entering exclusivity while key financial or business-diligence issues remain unresolved. Once that happens, the balance of power in the deal shifts decisively to the buyer.

We also see unrealistic financial forecasts—say, projecting 500 percent growth over three years while barely increasing sales and marketing spend. Buyers will challenge those assumptions immediately, and unrealistic models can damage credibility.

Finally, founders often underestimate the intensity of an M&A process. It can run for months and require sustained management attention. Having experienced legal and financial advisors allows management to stay focused on operating the business while ensuring that the deal team protects and rewards key employees appropriately.

Q: What are the key responsibilities an investment banker takes on during an M&A transaction?

A: Most founders are surprised by how much work is involved in a successful M&A process and how broad the banker’s role really is. Negotiating price and terms is only one part of the job. The heavier lift is in preparation, orchestration, and protecting value through the finish line.

It begins with compiling and cleansing historical financial information from disparate internal systems to produce supportable financial statements that clearly communicate performance and identify key trends in the business. From there, we help management build a credible and defensible financial model—not a wish list, but a set of projections investors will find realistic and data-driven.

We then develop a comprehensive information memorandum that frames the company’s story—market trends, competitive positioning, and both organic and inorganic growth opportunities—in a way that resonates with sophisticated buyers and investors.

At the same time, we oversee the population of the virtual data room, which can involve hundreds of document requests spanning finance, HR, intellectual property, legal, and technology.

Once materials are in place, we manage the identification and outreach to a broad and targeted group of potential acquirers or investors. This includes executing NDAs, handling initial Q&A and follow-up requests, soliciting and comparing initial indications of interest, and then down-selecting to the most attractive counterparties. From there, we negotiate the terms of exclusivity agreements and final purchase documents, maintaining leverage and competitive tension at every step.

We also coach management teams for buyer meetings and diligence sessions—anticipating difficult questions and running dry-run rehearsals of presentations to ensure consistency and confidence across all executives.

Throughout the process, the banker acts as a strategic navigator, guiding the company through critical decision points: responding to initial indications of interest, negotiating Letters of Intent, deciding when to enter exclusivity, and keeping the deal aligned with the agreed economics and timeline.

We also help founders understand where value can leak between enterprise value and actual proceeds—from debt-like items and working capital adjustments to escrow, indemnities, and the mechanics of M&A representations and warranty insurance. And finally, we seek to ensure the management team and broader employee base are appropriately rewarded and protected, which is essential in both private equity and strategic sales.

In short, a good banker is not just a negotiator—they’re the architect and air-traffic controller of a process that has hundreds of moving parts, all of which have to come together to close successfully and at full value.

Q: What LegalTech startups are you seeing that are particularly interesting?

A: We’re seeing an extraordinary wave of innovation across contract automation, compliance, and AI-driven document processing. A few companies stand out for their differentiated technology and commercial traction:

Avvoka – A contract-automation platform that enables law firms and in-house legal teams to draft, negotiate, and analyze contracts, dramatically improving speed and visibility.

Clerky – Provides incorporation and legal compliance filings and paperwork for startups.

Foundation AI – Uses artificial intelligence to extract, classify, and route data from legal and insurance documents, reducing manual review and accelerating workflows.

Jigsaw – A data-driven visualization platform built for legal, accounting, and finance professionals for complex business diagrams.

Juro – Streamlines the entire contract lifecycle through a collaborative browser-based workspace, helping legal and business teams close deals faster while maintaining compliance and control.

Thirdfort – Provides secure client verification and anti-money laundering tools that simplify onboarding and compliance for law firms and property professionals.

Each of these companies reflects how LegalTech continues to evolve from a traditionally manual, relationship-driven industry into a data-rich ecosystem where automation, compliance, and intelligence are driving measurable value for legal professionals and their clients.