One-third of small firms in London and the south-east expect to merge or be acquired, according to research from chartered accountants HW Fisher.
More than one-quarter of the 75 firms polled said they have been approached by a legal consolidator, according to the firm's third annual poll of the sector.
Some 43% of respondents said they intend to bring in new non-lawyer partners, up from 33% last year. One-third are pursuing outside investment.
Overall the firms reported an average revenue growth of 4.5%, rising to 10% at the larger end of the small practice spectrum.
Litigation work was the main area of income. Personal injury and clinical negligence work made up 15% of business, with 5% from employment and 4% in probate.
Some 93% of those polled said they have yet to notice an effect on business from the advent of alternative business structures, but 36% said they expected to feel the effects in 2014.
Paul Beber, partner at HW Fisher, said one-quarter of the firms surveyed had considerable levels of debt. He predicted further consolidation in the market. ‘The biggest thing is that [parts] of the SME legal sector are enjoying good growth,’ he added.