UK private equity deals for professional services firms jump almost 180 percent in a year

London — The number of private equity-backed acquisitions of UK professional services firms has jumped 179 percent in 2021 to 53, up from 19 the previous year, shows research from Mayer Brown.

Private equity 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 said Mayer Brown. The sector is also attractive as many firms are highly cash generative with low CAPEX requirements.

Major deals over the last few years have included spin outs of insolvency and consultancy arms of the "Big 4" accountancy firms, as well as acquisitions of major PR and communications firms.

Of the 53 transactions in the past year by private equity funds, 28 percent (15) were for marketing, PR and communications firms.

Mayer Brown said the sharp rise in PE-backed acquisitions comes as PE houses 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.

According to Mayer Brown, one way for PE funds to scale their exposure to professional services firms quickly is to build ‘platform’ businesses, by adding smaller PR or advertising agencies to an existing group. This is likely to be relatively simple and repeatable for PE funds to do.

There are a number of other subsectors of professional services which are becoming increasingly of interest to PE funds. This includes ESG consultancies that enable companies to develop more sustainable business practices, as well as digital transformation agencies, which help businesses improve their use of technology, for example in  e-commerce. 

UK private equity deals for professional services firms jumps almost 180 percent in a year from 19 to 53