Money Meets Ledgers: How Private Equity Is Reshaping Accounting

Private Equity Targets UK Accounting Firms in Unprecedented Wave

When Grant Thornton’s 250 partners pocketed an average of £682,000 each in April 2025, it marked more than just a windfall. The payouts, triggered by the completion of private equity firm Cinven’s £1.5 billion majority stake acquisition, signalled a fundamental restructuring of Britain’s accounting sector. Private equity has discovered a new hunting ground, deploying billions to acquire firms that were once bastions of partnership tradition. What was once unthinkable has become routine, and the implications extend far beyond boardroom deal tables.

The pace of change is notable. Private equity deals involving accounting firms have accelerated sharply, with deal activity reaching levels unprecedented in the sector. Grant Thornton’s deal came swiftly after Apax’s £700 million purchase of Evelyn Partners’ accounting arm, while Cooper Parry explored a sale potentially fetching up to £600 million and Xeinadin prepared for an exit following its partnership with Exponent Private Equity. These aren’t outliers. They represent the new normal in a sector valued at £39.8 billion, with revenue expected to climb at a compound annual rate of 5.8% through 2026.

Why Now: The Succession Crisis Fueling Private Equity Deals

The timing is no coincidence. British accounting firms face a demographic cliff that makes external capital not just attractive but, for many, essential. Senior partners who built their practices over decades are reaching retirement age without sufficient junior partners able to buy them out. The traditional partnership model, which relied on new partners purchasing retiring partners’ equity, has buckled under the weight of rising valuations and shrinking profit pools.

Succession planning presents difficult challenges as partners age and consider their financial worth to the business, while others question the productivity and financial contribution of those same individuals. The conversations are awkward, the financial hurdles daunting. Private equity solves this problem with brutal efficiency: instant liquidity for retiring partners, continuity for the business, and capital for growth. It’s elegant on paper.

Malcolm Gomersall, CEO of Grant Thornton UK, framed the Cinven deal as reflecting years of remarkable growth, weathering significant macroeconomic events to emerge stronger. Cinven’s approach to partnering with management teams and their commitment to audit quality was described as a key differentiator in the firm’s decision. Yet beneath the optimistic messaging lies a harder truth: many mid-tier firms lack alternatives. The capital required to modernize technology, compete for talent, and fund acquisitions exceeds what partnerships can generate organically.

A survey conducted in May 2025 found that 27% of respondents from the UK’s top 60 accountancy firms had already accepted private equity funding, while a further 19% would consider doing so in future. More tellingly, 86% reported being approached by external investors in 2024 alone. The question is no longer whether private equity belongs in accounting, but whether any significant firm can remain competitive without it.

The Economics Behind the Rush

The attraction is straightforward. Accounting firms generate stable, recurring revenue streams that appeal to investors seeking predictable returns. The UK sector comprises approximately 40,200 firms, though 80% consist of four or fewer employees. This fragmentation creates consolidation opportunities where private equity excels at capturing value through roll-up strategies and operational improvements.

Valuations tell the story. Accounting firms are commanding multiples significantly higher than traditional ranges, with some PE-backed deals fetching premium valuations that reflect strong investor confidence despite regulatory headwinds. For context, typical accounting firm EBITDA multiples historically range from 3x to 4.5x, but competitive tension and consolidation potential have driven select deals to higher levels. The premium reflects both the quality of cash flows and the scale of consolidation opportunity ahead.

Beyond immediate financial returns, private equity sees technology transformation potential. Many mid-tier firms lack capital to invest in artificial intelligence, cloud infrastructure, and advanced analytics. External funding enables rapid modernization that would take years under traditional partnership models. Grant Thornton UK, for instance, plans to hire 160 new partners over the next two years following its Cinven deal, a level of expansion difficult to imagine without external backing.

The UK remains Europe’s most active market for these deals, with private equity involvement in UK accounting transactions reaching its highest level at 42% of all deals in 2023, up five percentage points from 2022 and almost 14% since 2018. According to research tracked by industry sources, private equity firms are investing more than $10 billion in the tax and accounting business globally, leading to post-deal valuations of approximately $30 billion. Britain is following a trajectory similar to the United States, where projections suggest that over half of the top 30 accounting firms will have private equity ownership by the end of 2025.

The Private Equity Playbook

The acquisition strategy follows a consistent pattern. Private equity firms target mid-market firms with established client bases, strong regional presence, and limited access to growth capital. They acquire an anchor firm and then aggressively pursue bolt-on acquisitions. Sumer, for example, acquired Jerroms, Simmons Gainsford, Carpenter Box, EQ Accountants, Cowgills, Scrutton Bland, Sumer Northern Ireland, Douglas Home & Co, ASM Belfast, and DPC Chartered Accountants in a single financial year.

This consolidation creates regional hubs with economies of scale that smaller independent firms cannot match. PE-backed firms like EisnerAmper and Citrin Cooperman are aggressively pursuing mergers and acquisitions, with firms completing over a dozen acquisitions post-investment. The playbook emphasizes speed and scale, fundamentally different from the cautious, organic growth that characterized accounting firms for generations.

The financial engineering is sophisticated. Private equity typically targets annual returns of 20% or more over three to five year holding periods. To achieve this, they deploy operational improvements, technology investments, aggressive acquisition strategies, and often significant debt financing. The firms become platforms for consolidation rather than traditional partnerships focused on professional service delivery.

Regulatory Alarm Bells

The influx of private equity capital has triggered alarm among UK regulators. The Financial Reporting Council has expressed concern that external ownership could prioritize short-term financial gains over audit quality and public interest. The Institute of Chartered Accountants in England and Wales implemented new audit regulations effective 1 October 2024, requiring compliance by 1 April 2025.

The regulations create a fundamental tension. When a private equity firm invests in an audit firm, the audit firm is prohibited from providing services to the private equity fund or its portfolio companies, as this would create conflicts of interest that violate the FRC’s Ethical Standard. The buyout was reviewed by the Financial Reporting Council to ensure auditor independence remained intact in the Grant Thornton case.

These independence requirements address critical concerns. The ICAEW has highlighted the risk of private equity personnel becoming covered persons in positions to influence audit outcomes. This potential conflict between profit motives and professional ethics sits at the heart of regulatory unease. Can firms maintain their essential watchdog role when significant portions of the industry answer to investors whose primary obligation is maximizing returns?

The FRC has mandated that accounting firms report any approaches from private equity investors to ensure transparency and maintain industry standards. This signals regulatory vigilance but may prove insufficient to address deeper structural concerns about how profit-driven ownership affects audit quality and professional independence.

The Road Not Taken: MHA’s Public Market Gambit

Not every firm chose the private equity route. In April 2025, MHA, part of Baker Tilly, listed on London’s AIM market with a market capitalisation of £271 million, below its initial £350 million target. CEO Rakesh Shaunak explained the choice was unanimous among partners. The higher potential short-term gains from private equity were outweighed by maintaining control of strategic destiny and planning in the hands of the Board and partners.

The IPO raised £98 million through institutional and retail investors, providing capital for bolt-on acquisitions, technology investment, and exit routes for current and retired partners. MHA’s share price increased 2.5% from its opening price of 100p on the first day of trading. The firm aims to become a top 10 UK accounting business, generating over £500 million in annual revenue through UK expansion and potential moves into Europe.

MHA’s choice illuminates the trade-offs. Public markets offer access to capital without ceding control to a single investor with defined exit timelines. The reporting requirements and market scrutiny create transparency that some partners prefer over private equity’s more opaque structures. Yet the IPO route demands scale, consistent growth, and comfort with public market volatility that many firms lack.

The Partnership Model Under Pressure

Traditional accounting partnerships distributed risk and reward among partners who typically spent entire careers at single firms. This model fostered long-term thinking and professional standards rooted in personal reputation and liability. Partners had skin in the game, literally and figuratively.

Private equity changes this calculus fundamentally. External investors seek liquidity events within defined timeframes. This creates pressure to maximize short-term value, potentially at the expense of long-term client relationships and conservative professional judgment. The driving factors behind the rise of private equity in the UK accounting sector include the limitations of traditional partnership models and the need for alternative structures to address high staff attrition rates, limited growth potential, and increasing operational costs.

The capital injection addresses real problems. Many mid-tier firms struggle with succession planning as senior partners retire without successors able to afford buyouts. Private equity provides liquidity while theoretically ensuring business continuity. Grant Thornton’s partners agreed to hold back a material amount of equity for future partners during the investment period, attempting to preserve partnership culture within a new ownership structure.

Yet this solution comes with trade-offs. Once external investors hold majority stakes, fundamental decisions about risk tolerance, client selection, and service pricing shift toward financial optimization. The question is whether adequate safeguards exist to maintain professional standards when ownership structures prioritize investment returns above all else.

Technology as Catalyst and Consequence

The technology argument for private equity is compelling. Artificial intelligence, automation, and advanced analytics require substantial capital investments that many partnerships cannot self-fund. Private equity-backed firms deploy these technologies faster, potentially creating service quality advantages and operational efficiencies that independent firms struggle to match.

Grant Thornton UK indicated that, following the Cinven investment, external capital would allow substantial investment in talent and technologies. The firm aimed to reach £1 billion in revenue over the coming years, requiring major technology and acquisition investments. At MHA, following its IPO, approximately 50% of employees now use AI or automation tools, with 30% receiving formal role-specific training.

The technology divide threatens to stratify the market. Well-capitalized firms can offer sophisticated analytics, real-time reporting, and integrated advisory services that smaller independents cannot replicate. This creates a feedback loop: better technology attracts more clients, generating more capital for further technology investments. Independent firms risk becoming obsolete not through lack of professional competence but through inability to compete on technological sophistication.

What Comes Next: Three Scenarios

The next chapter of this story remains unwritten, but several scenarios seem plausible based on current trajectories:

Scenario One: Continued Consolidation. Private equity continues aggressive acquisition strategies, creating a handful of dominant regional and national players. Mid-market firms face binary choices: seek external investment, merge with peers, or accept slower growth and eventual marginalization. The number of truly independent partnerships continues declining, with most significant firms eventually backed by private equity or public markets. Technology investments accelerate, enhancing efficiency but also commoditizing routine services and pressuring employment in traditional accounting roles.

Scenario Two: Regulatory Intervention. Mounting concerns about audit independence and professional standards trigger stricter regulations on private equity ownership. The FRC and professional bodies implement more prescriptive rules around governance, independence, and conflicts of interest. Some private equity firms exit the sector or restructure investments to comply. The consolidation trend slows but doesn’t reverse, as fundamental economic and demographic pressures persist.

Scenario Three: Quality Divergence. The market bifurcates. Private equity-backed firms prioritize growth, technology, and financial returns, potentially at the expense of conservative professional judgment. A smaller cohort of independent firms maintains traditional partnership structures, competing on quality, personal service, and professional integrity. Clients increasingly differentiate based on whether they want efficient, technology-enabled service or relationship-driven, traditional accounting advice. Both models survive but serve different market segments.

The most likely outcome combines elements of all three. Consolidation will continue, regulatory scrutiny will intensify, and market segmentation will occur. The accounting profession faces a future where partnership structures that defined the industry for over a century become the exception rather than the rule.

The Stakes Beyond Accounting

The ultimate question transcends accounting firm economics. Can the profession maintain its essential role as financial watchdog when significant portions answer to investors whose primary obligation is maximizing returns? Audit quality is a public good. When accountants certify financial statements, they serve not just clients but investors, creditors, regulators, and the broader economy that depends on reliable financial information.

The Grant Thornton partners who received their £682,000 payouts made rational economic decisions. Private equity firms deploying capital into the sector are pursuing legitimate investment strategies. Regulators attempting to preserve audit independence are protecting vital public interests. Yet the collective result of these individually rational decisions may be a profession fundamentally altered in ways whose consequences won’t be clear for years.

Technology investments funded by private equity may improve service quality. Consolidation may create more resilient firms better able to compete globally. Professional standards may survive intact despite ownership changes. These optimistic outcomes are possible. But so are alternatives where short-term financial engineering compromises long-term professional integrity, where aggressive growth targets conflict with conservative judgment, and where the essential independence of the audit function erodes gradually until a crisis reveals the damage.

The next few years will provide the answer. Britain’s accounting sector is conducting a real-time experiment in whether professional services can maintain their foundational purpose when ownership structures change fundamentally. The stakes extend far beyond accounting firms themselves to the integrity of financial reporting across the British economy. What happens when money meets ledgers may determine whether the ledgers themselves remain trustworthy.