This year, we’ve seen a marked acceleration in investor interest in UK professional services firms focused on audit, tax and associated advisory services. Collectively referred to as “accounting services” (to the distaste of some market participants), this sector is witnessing a sustained surge in transaction volumes. Maturing business models and an expanding pool of willing investors are creating favourable conditions for successful investment outcomes, with reduced risks for exits.
Looking ahead to 2025, a wave of private equity (PE)-backed firms is likely to seek new equity and debt investors as they enter their next growth phases. This trend aligns with the natural conclusion of investment periods and a growing track record of successful transactions.
Accounting services present a compelling case for PE value creation. Many parallels can be drawn with established professional services markets, such as actuarial consulting, employee benefits consulting, investment consulting and risk consulting. However, accounting services may offer even greater potential, driven by:
- Market size and resilience: The competitive structure is segmented into tiers, and fragmented underneath a set of global or international majors, with plenty of headroom for consolidation
- Revenue quality: High client retention and recurring revenue streams underpin robust earnings
- Growth potential: New business opportunities are ample, as attractive demand “trickles” down from major players’ increasing focus on multinationals
Experienced business services investors are familiar with these opportunities. We’re also finding that the boundaries between business services and financial services are blurring, with professional services assets of interest to both. Financial services investors are increasingly looking to read across past successes in now significantly more mature verticals, such as insurance broking and wealth management. Figure 1 illustrates some of these similarities.
Key drivers of investor interest
1. Market depth
The UK accounting services market, valued at approximately £30 billion, spans audit (35%), tax (20%) and advisory (45%). These services are broad in what they encompass (see Figure 2).
To put this into perspective, the UK accounting services market is six times the size of the financial advice market and four times that of retail insurance broking. It is also far larger than actuarial consulting, employee benefits consulting and investment consulting, all of which have been extremely productive playing fields for PE investment.
Within this £30 billion market, around £18-20 billion is tied to small and medium-sized enterprises (SMEs), £6-8 billion to large corporates, and the remainder to multinationals. For non-Big 4 firms, at least £25-27 billion of this is contestable, depending on their scale and capabilities.
2. Consolidation potential
Although the Big 4 dominate with a 60% market share, the remaining £13 billion is highly fragmented across approximately 43,000 firms. Many of these firms hold less than 1% market share, offering ample opportunities for consolidation (see Figure 3). This dynamic contrasts sharply with financial advice, for example, which has only 5,000 firms.
Consolidation in accounting services remains in its early stages, leaving significant potential for multiple arbitrage and the acquisition of high-quality assets.
3. Resilient earnings profile
While accounting services may not have the same level of contractual certainty as wealth management, the recurring nature of audit and tax services ensures high client stickiness, similar to insurance broking. In our experience, revenue retention rates of 80-90% are common, supported by:
- Non-discretionary demand for audit and tax services
- Pricing resilience, driven by a structural shortage of qualified accountants
- Opportunities for cross-selling advisory services
4. Value creation opportunities
Accounting services firms are human capital-driven businesses, akin to wealth management and insurance broking. In this sense, growth drivers can be thought of in much the same way: client growth and share of wallet enhancement, and partner/“sales head” productivity enhancement (see Figure 4).
Typical focus areas in accounting include:
- Creating better alignment in pricing within and across regions
- Cross-pollinating existing capabilities across regions (e.g. UHNWI/expat tax advice)
- Cross-selling broader services, such as corporate advice and M&A support
- Creating a more “pyramid-like” support structure to free partners up for sales
As noted above, demand “trickling down” from the Big 4 also creates new opportunities for mid-tier and smaller firms, as well as a talent pool of partners and professionals.
A sector ripe for innovation and growth
Accounting services offer a unique combination of scale, resilience and growth potential. For investors with experience in adjacent sectors, this market provides a familiar landscape with potentially larger headroom for value creation. Additionally, firms adopting integrated and scalable operating models are avoiding the pitfalls of poorly aligned businesses, setting the stage for long-term success.
We anticipate rich opportunities in this sector for at least a decade, making it a promising focus for investors seeking resilient and scalable value creation.
For a further discussion, reach out to Bronswe Cheung, Peter Ward and Dominic Miles.
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