Where accountancy and law have experienced considerable consolidation, which professional services sector will be the next target for PE firms?
Private equity investments in accountancy firms is a new paper from representative body Accountancy Europe. It sets out how a combination of factors have driven private equity investment into accountancy firms in recent years.
We know that the fundamental attractiveness of these firms are: they are cash generative; have recurring fees; the firms are relatively small and fragmented; and owners face investing to be sustainable… or cash out.
As the report points out: “…Fast-moving technological developments, digitalisation and increasing competition have led firms to invest more heavily to remain competitive.”
The opportunity for PE to consolidate and then drive efficiencies, enhance digital capabilities and broaden services have been too much to resist.
The report finds that there have been 400 PE-backed deals in the past three years across Europe in the accountancy space. Most (41%) have taken place in the UK; but the Nordic region, as well as the biggest European countries, have also seen an uptick in deals.
Research by Saffery finds that both PE and non-PE consolidation is prevalent in the UK legal sector. Some 99 transactions were completed in 2024, a 25% increase on the 80 deals a year before, describing it as “what remains a highly fragmented UK legal sector”.
The European trust & corporate services market has attracted the interest of PE firms over a number of years. However, the market is still fragmented. A new report by ResearchandMarkets.com outlines steady growth. It predicts the market will reach US$9.1bn (£6.7bn; €7.7bn) by 2030, from US$8.2bn in 2024.
The report points to several reasons for continued growth:
· Globalisation continues to drive cross-border operations and compliance;
· Regulatory complexity growth increases demand for services;
· Tech is driving better, more efficient, services;
· High-net-worth growth in emerging markets; and
· Outsourcing to enable businesses to focus on their primary activities.
There are clear comparisons that can be made regarding the challenges and opportunities that international corporate services firms face. This may result in an uptick in PE M&A interest.
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