Private equity investors are buying accountancy firms on an unprecedented scale. Several significant deals concluded last year, as investors worked their way through a field they see as ripe for consolidation. Among those was the acquisition of the UK’s sixth-largest accountancy firm, Grant Thornton, for £1.5bn.
This trend is predicted to continue. More than a quarter (27%) of the UK’s top 60 accountancy firms have now received private equity funding, according to a new study by the law firm Kingsley Napley. And far more (86%) have been approached by interested investors.
Simon Massey, the managing partner at Menzies, receives cold calls from private equity investors at least once a week. “In fact,” he says, glancing at his phone, “there’s one calling me right now.” The attention is both intense and worrying, Massey admits. “They talk a big game about improving performance, but rarely take the time to understand the business itself.”
Why are private equity circling?
Since the 1980s, the accountancy sector has been dominated by the big four: PwC, Deloitte, EY and KPMG. But the landscape is changing. Regulators are tightening the rules on auditor independence to address long-standing conflicts of interest, which weaken audit quality and erodes public trust. This is making it harder for firms to cross-sell audit and advisory services, thereby undermining the big four’s most profitable business stream.
Accountancy isn’t just about numbers. It’s fundamentally a business of credibility
Sensing an opportunity, private equity firms are circling. Their strategy is simple: buy up the fragmented tier below the big four, consolidate it, professionalise operations and compete for market share. The stability of the accountancy sector is appealing to investors. These are typically well-established businesses with recurring revenue from loyal clients, providing predictable income and a strong foundation for return on investment.
And it appears the interest is mutual. Just under half (46%) of UK accounting firms are open to private equity investment, the Kingsley Napley survey found.
When deals are structured well, private equity investment can be transformative for accountancy firms. It can provide the capital to pursue bolt-on acquisitions, accelerate growth strategies and grow through consolidation. Plus, the options are limited for firms struggling to modernise their operations or meet evolving client expectations: partners can fund it themselves, take on debt or bring in outside investors. For some, private equity is the most viable path forward.
However, Nick Wallis, a partner specialising in M&A at Gerald Edelman, a UK accountancy firm, argues that greed is often a major factor in accepting private equity investment. “Sell to private equity and suddenly senior partners get a huge payday.” But that’s a one-time win, he warns. “What comes after is a very different game – one that often reshapes the firm’s priorities, incentives and culture.”
A talent drain
Concerns are growing about private equity’s empire-building in the accountancy space. If such activity continues at its current rate, the market could collapse, Wallis warns. “Their focus on maximising profit risks compromising internal culture and quality of work. This could lead to a market crash in the next five to 10 years as staff and clients depart.”
At the heart of the issue is the erosion of traditional incentives, argues Wallis. Private equity investors often take a significant portion of the target’s equity, which would otherwise be available to future partners. “There’s no longer a partnership track in the traditional sense,” Wallis explains. “How do you attract and retain top talent when the carrot disappears?”
With no clear path to equity ownership, high-performing professionals at PE-backed accountancy firms are leaving the sector. Both Wallis and Massey report an uptick in senior-level talent exploring new opportunities. Some are migrating to firms that still offer traditional equity partnerships, while others are going it alone, launching boutique practices that restore autonomy and long-term reward.
Private equity’s laser focus on returns can also damage firm culture. “At the end of the day, they are there to make money,” says Wallis. That often means pushing relentlessly for financial KPIs and piling pressure on staff, leading to low morale, dented professional pride and, ultimately, elevated attrition.
If this trend continues, the accountancy talent pool could dry up, Wallis says. Many finance chiefs and financial controllers get their foundational training in public accounting. So if the pipeline thins out, the reverberations will be felt throughout the wider financial industry.
Audit quality at risk
What’s more, regulators worry that private equity’s emphasis on fast growth and profit threatens the very foundation on which the accountancy profession is built: trust. The UK’s audit watchdog recently raised its assessment of the risks posed by private equity ownership from medium to high – citing concerns about the threat to long-term client relationships and audit quality.
These risks can manifest in several ways. Massey warns that PE-backed firms may underinvest in professional development, lean too heavily on junior or offshore teams or prioritise financial performance over professional rigour.
How do you attract and retain top talent when the carrot disappears?
Some buyout firms are aggressively undercutting fees to win market share. “If the market rate for an audit is £30,000, they might quote £25,000 to win the client,” Massey says. “This raises concerns about the quality of the work performed. A significantly cheaper audit implies that corners are being cut to maintain profitability.”
Price-driven competition such as this risks a race to the bottom. And in a profession where quality, independence and deep technical expertise are paramount, taking shortcuts can cause considerable damage. “Accountancy isn’t just about numbers,” Massey stresses. “It’s fundamentally a business of credibility. If growth targets eclipse client trust and override reputation, the asset PE investors thought they were buying could begin to erode.”
Other PE-backed firms are moving in the opposite direction. They are prioritising revenue per client, leading to fee hikes and a focus on larger, more profitable accounts. Long-standing mid-tier clients may find themselves deprioritised, or priced out entirely, Massey says.
Too little, too late
Massey believes private equity’s courtship of the accountancy sector has triggered a structural transformation that is too late to reverse. “Private equity have already achieved a substantial and potentially irreversible foothold,” he says. “Regulators are trying to close the stable door, but the horse has already bolted.”
But it is not too late for independent firms to compete and thrive, Massey adds. “In fact, the actions of PE-backed firms are creating new opportunities for independents to attract top talent who are becoming disillusioned with the buyout model.”
So while the promise of capital, consolidation and efficiency may deliver short-term gains for partners and investors, the long-term costs of accepting private equity investment may be unsustainable. Career pathways are being eroded, attrition is rising and client relationships are fraying.
The rise of private equity ownership in the accountancy sector risks undermining the very qualities that make those firms valuable in the first place: credibility and trust. If talent walks away and standards slip, the returns that drew investors in could ultimately disappear – and with them, a generation of accountants who once saw the profession as a long-term calling, not a short-term exit.
Private equity investors are buying accountancy firms on an unprecedented scale. Several significant deals concluded last year, as investors worked their way through a field they see as ripe for consolidation. Among those was the acquisition of the UK’s sixth-largest accountancy firm, Grant Thornton, for £1.5bn.
This trend is predicted to continue. More than a quarter (27%) of the UK’s top 60 accountancy firms have now received private equity funding, according to a new study by the law firm Kingsley Napley. And far more (86%) have been approached by interested investors.
Simon Massey, the managing partner at Menzies, receives cold calls from private equity investors at least once a week. “In fact,” he says, glancing at his phone, “there’s one calling me right now.” The attention is both intense and worrying, Massey admits. “They talk a big game about improving performance, but rarely take the time to understand the business itself.”
