Corporate law firms are racing to scale up their AI capabilities by merging and making splashy tech acquisitions, while smaller rivals warn they’re getting priced out by AI vendors. 

Firms’ spending on legal technology was up over 11 per cent in the third quarter, Thomson Reuters’ Law Firm Financial Index found. The surge is accelerating the growth of major law firms globally, as they compete to attract top AI talent.

Earlier this month, U.S.-based Perkins Coie reached a megamerger deal with U.K.-based Ashurst, citing the need to create a larger firm to increase AI investments and hire tech specialists. New York law firm Cleary Gottlieb took it one step further in March, acquiring Springbok AI to gain access to 10 data scientists and AI engineers. 

Canada’s Big Law firms, including the global corporate firms that employ hundreds of lawyers, and the Seven Sisters law firms historically favoured by Bay Street, aren’t far behind in striking deals to design their own AI systems. Dentons Canada, which hired David Cohen as its first-ever chief transformation officer last month, has partnered with AXL to “co-develop” legaltech ventures. 

Andrea Johnson, a partner at Dentons Canada, said that being among the largest global buyers in the world of legal technology does provide a “major advantage”: insight into the many legaltech products that have been adopted in various global offices. Its clients here benefit both from global investments, as well as the firm’s local investments, such as large language models that are specific to Canadian law. Still, CTO Cohen noted that some legaltech companies, like Vancouver-based Clio, have successfully targeted smaller practices before moving on to Big Law. 

Smaller law firms that pride themselves on efficiency are eager to use AI to compete for elite, “white shoe” business clients, but say it can be daunting when big law firms are building proprietary AI. 

“A lot of technology is priced in a way that makes it cost prohibitive, unless you’re a big firm,” said Jennifer Allen, a Toronto-based partner at the boutique corporate law firm Allen McDonald Swartz.

Some Canadian lawyers hoped that being early movers on generative AI would help them compete with Big Law’s armies of clerks, paralegals, students and associates by automating simpler tasks on a budget.

But AI has yet to level the playing field for many boutique firms. 

“I see a lot of these AI vendors approaching the big firms and saying, ‘Will you partner with us?’’ said Marshall Pawar, a founding partner of Vancouver-based Michael, Evrensel & Pawar. “I don’t see a lot of them picking up the phone to approach us.” 

It’s something that Alexi CEO Mark Doble has been worried about, too. The Toronto-based legaltech company is focused just on law firms at the moment, rather than other types of lawyers, like in-house lawyers in public companies. In part, he said, he wants to ensure that legaltech companies aren’t “cutting out the law firm as a middleman.” 

While there has been a “trend of democratization of legal services to smaller firms,” he is concerned the industry could be near an inflection point where that trend reverses. 

“Law firms are aggressively adopting tools,” he said, “in ways that smaller firms are going to have trouble competing with.” Clio also noted that the trend has been particularly severe in the past year. 

“Historically, solo and small firms have led the way in technological adoption compared to larger firms,” Clio’s 2025 report on small and solo law said. “However, when it comes to AI adoption, the opposite can be said… it may have to do with resourcing.” 

Corporate law presents a budgeting problem when it comes to AI. Firms must use specialized software to protect legal information—but they bill by the hour and can’t add more to pay for expensive new technologies, lawyers told The Logic. While AI adoption jumped from 14 per cent to 26 per cent at law firms this year, Thomson Reuters data shows it’s mostly mid-sized firms seeing high return on investments while both small and large firms lag behind. 

Some small law firms see these issues as temporary setbacks that could be addressed with new business models, like fixed-fee billing. Justin Kates, the Vancouver-based managing partner of DuMoulin Black, said there’s simply a better long-term business case for software companies to target small firms, rather than just a handful of elite firms.

Pawar said he’s confident that once his firm can access AI they will use it well, since they’re entrepreneurial and lack the bureaucracy of their lumbering rivals. Allen, of Allen McDonald Swartz, pointed to tools like Thomson Reuters CoCounsel that helps their firm speed up tasks like searching through a shareholder agreement.

Debbie Weinstein, an Ottawa-based partner at LaBarge Weinstein, uses technologies like Firmex or Ontario-based MinuteBox to expedite tedious tasks for clerks and young lawyers, like updating multiple documents with a clients’ new address. 

While law firm M&A is up about nine per cent from a year ago in the U.S., and merger offers aren’t uncommon in Canada, Weinstein said she’s not worried that consolidation in Big Law will crowd out her firm of about 25 lawyers. 

“We’re a niche that attracts entrepreneurs and businesses who do not want to work with national law firms,” she said.