Leap in private equity-backed purchases of professional-services firms

The number of private equity (PE) backed acquisitions of UK professional-services firms jumped 179 per cent last year as the sector increasingly attracts interest, according to new research.

Figures compiled by law firm Mayer Brown found that total deals completed in the year rose to 53, up from 19 in 2020.

The practice said PE funds are becoming increasingly interested in the sector as many professional-services firms have improved their business models to create more stable income from retainer and other consultancy work. The sector is also seen as attractive as many firms are highly-cash generative with low capital-expenditure requirements.

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UK professional-services firms are increasingly in demand from private-equity buyers, according to new figures (file image). Picture: AFP via Getty Images.

Major deals in recent years have included spin-outs of insolvency and consultancy arms of the “Big Four” accountancy firms, as well as acquisitions of major PR and communications firms.

Of the 53 transactions in the past year by PE funds, 28 per cent were for marketing, PR and communications firms.

Mayer Brown said the sharp rise in PE-backed acquisitions comes as such investment vehicles are under pressure to deploy capital quickly. This has led PE funds to look more closely at the professional-services sector where their involvement would have been considered rare a decade ago.

Among the biggest UK deals for professional services firms in the past year is the £2 billion purchase of sustainability consultancy firm ERM Group by KKR.

Meanwhile, figures from KPMG showed that strong activity from PE houses helped total investment in UK fintechs hit a “staggering” $37.3bn (£28bn) in 2021, up from $5.2bn in 2020.

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