The UK’s accountancy firms are up for sale. Private equity (PE) investors have swooped on the sector over the past three years, attracted by the reliable income streams firms enjoy from accounting and audit clients, as well as the potential for growth from organic expansion and M&A.

The trend is part of an international push into the sector by financial investors. Global PE and venture capital-backed investments in the sector reached $6.3bn during 2024, according to S&P Global Market Intelligence data, the highest total for a decade; there were around 25 separate deals. 

Research by ICAEW showed that the majority of firms felt private equity investment was not for them, although a significant minority were not averse to the idea.

However, the UK appears to be leading the charge, with deals continuing at pace. Already, 2025 has seen transactions including Blixt Group investing in Beavis Morgan and Inflexion taking a stake in Baker Tilly’s Netherlands business.

“Accountancy firms are highly attractive to PE,” says Lee Humble, UK head of corporate finance at Azets. “The recurring revenue they earn from core services provides excellent visibility of future income and is largely recession proof. There is significant potential to improve efficiency and effectiveness through technology investment, which can enhance revenues and profitability.”

Indeed, Azets itself provides a case study of what is possible. The business was formed in 2017 by the PE group Hg, which saw an opportunity to digitalise financial compliance and accounting for small and medium-sized companies. Azets has subsequently grown through the acquisition of more than 90 small accountancy firms around the country. It took on further PE investment in June 2023, with PAI Partners taking an equal stake alongside Hg.

Humble believes the growth Azets has enjoyed would not have been possible within the confines of the traditional partnership structure that accountants have usually operated through. “With PE comes cash, but also the experience of targeting growth and return that partnerships often don’t have,” he says. “Most partners in small and medium-sized accountancy firms have never dealt with the pressures that come with rapid growth or running a large organisation.”

Ambitious for growth

Other PE firms are pursuing similar strategies. For example, Dutch investor Waterland invested in Cooper Parry in 2022 – before selling up to Lee Equity in December; the firm subsequently acquired a series of smaller businesses. In 2023, Waterland also invested in Moore Kingston Smith, one of the UK’s 20 largest businesses.

Elsewhere, Sumer launched in early 2023, with PE investment from Penta Capital and BlackRock. Tenzing has invested in Gravita, an accounting platform seeking to expand through acquisitions; deals have included stakes in DJH Mitten Clarke (now rebranded as DJH). 

There is no shortage of targets, with just over 40,000 accountancy firms currently trading in the UK; around 80% of those businesses consist of four or fewer employees. Smaller firms may lack economies of scale or capital for investment, prompting them to pursue investment from third parties or sales to larger groups.

AAB has been aggressively consolidating smaller firms since August Equity invested in 2021. As have Xeinadin (backed by Exponent since 2022) and TC Group (backed by Inflexion since 2023).

Many firms face increasing challenges around recruitment and retention, struggling to compete, particularly on remuneration. A related problem is succession planning, with significant numbers of firms led by older partners eyeing retirement.

Meanwhile, increasing operational costs – and high levels of inflation over the past two years – have hit profitability. The growing compliance burden, as regulation of the sector becomes more onerous, is also squeezing margins.

In addition, accountancy firms are under pressure to invest in new technology, particularly in tools such as artificial intelligence that can both underpin productivity improvements and support new service offerings.

“The opportunity at its best is for PE-backed professional services firms to balance the need to pay senior leaders in the current year while investing in the future, which is a trade-off that partnerships have often struggled with,” says Mark Raddan, CEO of Interpath, another investor in the sector. “To achieve their potential, these businesses need significant investment, particularly to acquire, develop and retain talent, but also as the role of new technologies evolves.”

Not just the UK

Interpath, formed by a carve-out from KPMG in 2021, is pursuing a pan-European strategy, having bought its former parent company’s restructuring business in France and the German-headquartered business Kerkhoff. The company is now thought to be in discussions over a similar sort of deal in Spain.

“The landscape of the professional services market in the UK, Europe and beyond is evolving, providing opportunity for further PE investment,” says Russ Worrall, UK head of advisory, Interpath. “I think ownership structure matters: by being part of a global business with common ownership and no conflicts, you have the ability to provide a seamless service and can guarantee quality.”

That’s not to suggest there will be no bumps in the road – deals aren’t guaranteed to work out. There is plenty of scope, for example, for culture clashes as PE and partnerships come together. Sceptics also point to the limited time horizons of PE investors, given their need to make a profitable exit from businesses as part of the natural cycle of their funds. Indeed, the Financial Reporting Council has expressed concerns that PE ownership could prioritise short-term gains over audit quality and public interest.

At Azets, Humble also warns that PE investors in the sector may prefer some business lines to others. “There may be less interest in advisory because it’s more volatile and less predictable than recurring services,” he says. “Depending on the prevailing economic and political backdrop, you can have a phenomenal year or a terrible one. That can be uncomfortable for financial investors.”

Still, the direction of travel in the sector looks set. “We’re still in the relatively early stages of this wave of consolidation,” says Raddan. “For platforms such as ours, there is still a long way to go – there is huge potential to keep acquiring those founder-led businesses and to build an organisation that can begin to disrupt both the Big Four and established boutiques.”

Big Four challenge?

Indeed, the shake-up of the sector raises questions over the future for Deloitte, EY, KPMG and PwC themselves. Might they also rethink their commitment to independence if and when PE-backed rivals begin to pose more of a threat?

Certainly, EY has already investigated a different approach, having spent an estimated £480m on ‘Project Everest’, a plan to separate its audit and advisory businesses, with the latter to be floated on the stock exchange. The project was formally abandoned last year amid disagreements about its merits, but EY has said publicly that it remains convinced that structural change is attractive.

Not that bringing in strategic investment has to mean abandoning the partnership structure. Waterland’s investment in Moore Kingston Smith has seen the accountancy business retain its partnership. “We could see that there was going to be consolidation in the market and we are ambitious, so we wanted to be part of that,” recalls Marc Fecher, chairman of the business. “We needed funds to pursue that ambition, but we didn’t want to dilute our partner-led culture.”

Effectively, therefore, Waterland has become a fellow equity partner in the business. Its investment has enabled Moore Kingston Smith to pursue deals such as last October’s merger with Shipleys, but hasn’t required it to turn its back on its traditions. “All our partners still meet in person at least once a month,” Fecher says. “We now have a bigger brand with greater recognition, more depth on our bench and increased investment across all our capabilities. New funding has supported both organic and inorganic growth.”

Listings are also under consideration. In February, it was reported that MHA was looking at a potential £300m listing on AIM, although as we go to press that may be back on ice as the FRC looks into MHA’s audit of failed construction giant ISG. Ultimately, with PE interest in the sector continuing to grow, investors may need to be imaginative and open-minded about deal terms and corporate structures in order to secure the assets they are targeting. Competition is increasing, particularly as larger investors enter the fray. In February, BGF invested in Paperchase Accountancy.

In December, Grant Thornton announced its partners had voted unanimously to accept strategic investment from Cinven, which subject to regulatory approval will be completed imminently. Press speculated that the value was in the region of £1.3bn, perhaps the most significant deal yet in the sector. And Cinven has made other recent investments in professional services, including $5.4bn into Luxembourg-headquartered Alter Domus. Elsewhere, Apax last year agreed a deal to acquire the accountancy arm of wealth manager Evelyn Partners for a reported £700m.

Interest in the sector from PE’s larger players will be welcomed by smaller investors currently focused on buy-and-build activity. As they work towards exits, they will need a pool of buyers with the appetite and capacity to make larger acquisitions. “This is a cycle that is going to stretch well beyond the next decade,” adds Humble. “The opportunity is there to build a really sizeable and influential challenger brand.”