Private equity boom: Nearly 9 in 10 accountancy firms approached last year
The interest in UK accountancy firms from private equity houses has risen to an all-time high as fresh data revealed the appetite for “a major injection of funds” on both sides.
Nearly half (46 per cent) of accounting firms are open to private equity investment, while a third have already received private equity funding, according to a survey by law firm Kingsley Napley shared exclusively with Morning Wire.
However, the staggering figure revealed was that 86 per cent of respondents from the top 60 UK firms said their firms had received approaches from PE or other external investors over 2024.
The majority of respondents (80 per cent) to the Kingsley Napley report were managing partners.
“The popular view of why accounting firms are welcoming private equity investment is that a major injection of funds to make a step-change difference in tech will help to future-proof practices, without having to rely on raising partner capital or obtaining loans or overdrafts from a bank for such,” explained John Young, partner at Kingsley Napley.
Just last month, the Sunday Times reported Xeinadin was preparing for a sale to private equity investors in a deal exceeding £800m.
This comes on the back of a flurry of major deals announced over the last year, including Evelyn Partners’ accountancy and advisory business, which was sold to private equity firm Apax for £700m last November.
The UK professional and business service sector accounts for 12 per cent of the country’s total economic output, with a collective turnover of £277bn.
The new report noted that partner capital (46 per cent) and bank lending (39 per cent) are still, by far, the most common sources of funding, meaning PE funding is not yet commonplace in the
market.
The risks and concerns associated with private equity investment included concerns about loss of strategic or operational control, loss of identity, and partner retention.
Julie Matheson, partner at Kingsley Napley, explained: “Whilst regulatory considerations need to be high on the agenda for investment deals, especially in relation to audit, the challenges are not insurmountable.”
“There are strict rules to protect the independence of audit functions and also prescribed requirements for probate and other licences offered by regulators,” she highlighted.
Despite that, Matheson noted that “without doubt private equity is reshaping the accounting sector, not just at the larger firm end but in the mid-market and smaller firm market too.”
“The sector could look quite different in years to come,” she added.