Private-equity funds have increasingly begun to buy up professional services companies, as they face mounting pressure to deploy their capital quickly in the face of economic uncertainty.
The number of private-equity backed acquisitions of UK professional services more than doubled over the previous year, from 19 in 2020 to 53 in 2021, according to figures from law firm Mayer Brown.
“Last year private equity funds started showing an increased interest in acquiring professional services firms,” said Perry Yam, private equity partner and co-leader of the global Corporate & Securities practice at Mayer Brown. “This year that interest has grown significantly.”
The 179 per cent increase comes as private equity funds seek to cash in on the reliable incomes generated by professional services companies, as they face pressure to invest their capital.
“Consultancy firms that have reliable streams of recurring revenue are very appealing targets for PE houses,” Yam said.
“PE funds are finding that those recurring revenues don’t just exist in traditional areas of professional services like accountancy, tax and legal, but also in newer subsectors like PR or digital consultancy,” Yam added.
The trend has seen PE funds turn their focus towards a sector they had been reluctant to get involved with a decade ago.
The pressure to invest has seen PE funds help spin out new firms from the Big Four.
The past year has also seen PE funds acquire a number of major PR and communications companies.
The figures show that of the 53 PE-backed acquisitions of UK professional services firms last year, 28 per cent were acquisitions of PR, marketing, and communications firms.
“Some deals in this area are aimed at building up multi-disciplinary professional services firms,” Yam explained.
“There are clear synergies between different areas of professional services, such as restructuring, consultancy and PR. PE funds are betting on this to deliver profitable growth and faster margin improvement through economies of scale.”
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