M&A trends in 2025: accountancy firms represent attractive targets for private capital investment
Insight

Private capital investment in tax, accountancy and advisory firms
Over recent years, professional services firms, including tax, accounting and advisory firms, have proved to be an attractive investment opportunity for private capital acquirers.
Private capital buyers are attracted by the predictable recurring revenue streams of accounting, tax and advisory firms, and the fragmented nature of the industry (particularly at the lower end of the market) allows consolidation opportunities.
There are also a number of benefits for the accountancy firms. The senior management teams are attracted by access to immediate capital to finance growth. This might be used to finance growth in specific industry segments (noting the ongoing expansion of accounting firms into US legal services as that is liberalised) or geographical regions, as well as allowing increased investment in IT infrastructure, regulatory compliance solutions and marketing and operational areas. In addition, accepting external investment can offer a potentially lucrative exit strategy for founders/senior partners open to exploring new challenges, while providing finance to offer competitive remuneration for retained management and employees. This is a particular benefit for smaller practices where succession planning is often a thorny issue.
2025: a year of consolidation activity?
While private capital investment in accountancy firms has been a theme for some years, particularly in the US market, 2025 looks set for an increase in consolidation activity in the UK.
Two recent examples from late 2024 highlight the interest of private capital firms in the investment opportunity represented by accounting, tax and advisory outfits. First, in November, the announcement of Cinven’s majority investment in Grant Thornton UK [1]; and then in December, IK Partner’s acquisition of a majority stake in Dains Accountants [2]. This follows the significant deal activity in the US by private equity sponsors including the recently announced investment by Blackstone into Citrin Cooperman.
We expect 2025 to see further investment activity in this sector, and through our professional partnerships group [3] we are able to advise on such opportunities on both the buy-side and sell-side.
In particular we have set out particular deal considerations around retention of key partners and employees when planning for an acquisition or sale of a professional services firm. We will look at the other important considerations throughout the year.
Retention and incentivisation of talent
Farrer & Co’s financial and business services M&A practice regularly acts on exits of/investments into professional services and financial advisory businesses, repeatedly encountering similar issues around succession planning and the retention of talent.
A key concern in all these transactions will be the retention and incentivisation of talent, particularly where invested capital is used to pay out departing founders/senior employees. Private capital investment can be a positive force in this area, allowing accountancy firms to offer increasingly competitive salaries, performance-based incentives, and comprehensive training programs. However, careful thought will need to be given to the transaction structure in the context of the buyer’s investment goals.
Key employee remuneration
A priority for any investor will be to get key employees of the target on side so as to successfully integrate and retain clients following acquisition.
A buyer will first have to identify who it considers – as determined by the rationale behind the acquisition and its future aspirations – to be “key employees”. Once the key employees of the target have been identified, the next step is to incentivise them under transitional and future plans, whether by way of cash bonuses or by way of option schemes (preferably tax-advantaged). Where possible, buyers may wish to link key employee remuneration to the buyer’s investment goals. Such schemes could include goals including revenue growth, cost reduction, or successful integration milestones.
Career development and advancement opportunities
Non-financial incentives that focus on long-term career growth can also play a key role in facilitating successful integration. Offering clear advancement opportunities, particularly to those who have been identified as key employees by the buyer, can foster commitment to the new entity as well as motivating staff who see clear pathways for advancement.
Regulatory restrictions
Buyers should ensure they give proper thought to any such employee incentivisation schemes, and should be aware that a number of UK regulated firms (including accountancy firms) are subject to one or more “Remuneration Codes”. Accountancy firms could be subject to the FCA’s Remuneration Code, for example, if they provide regulated services, such as audit, tax advice, or financial advisory services, and the FCA classifies them as “significant”.
The relevant Remuneration Code may provide, for instance, that, in respect of certain senior staff known as "material risk takers", any retention awards should only be paid rarely, only be paid to key staff after a defined event or at a specified point in time, and, in certain cases, notified to the FCA. The payment of a retention award may also be made dependent on the individual meeting certain performance criteria that have been defined in advance. Buyers therefore need to be careful to ensure that any post-completion bonus scheme is designed in such a way to meet these detailed regulatory requirements.
Many thanks to Edward Everett, a current trainee in the team, for his help preparing the article.
Farrer & Co’s full-service team are experienced advisers on financial and business services M&A, on both the buy-side and sell-side. For further information about the issues raised in the article, please contact any of the authors.
[2] IK Partners to acquire majority stake in Dains alongside management
[3] Partnerships & LLPs | LLP Law | Farrer & Co
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, January 2025