Private equity consolidation in the UK market

The UK has found itself in an evolving landscape of mid-market deal activity in recent years, characterised by consolidation and the pursuit of growth opportunities funded by private equity.

In recent years, private equity investors have frequently adopted buy-and-build and consolidation strategies to accelerate growth beyond organic capabilities. As would be expected, businesses with multiple acquisitions tend to scale more rapidly compared to businesses aiming for organic growth, resulting in significant interest in companies with scalable business models.

The appeal of this strategy lies in its ability to drive fast revenue growth through the acquisition of new clients and the expansion of services, uncover potential cost synergies and enhance valuations, ultimately leading to larger and more competitive firms that benefit from economies of scale and multiple arbitrage. Larger entities, often backed by private equity, have therefore been broadening their portfolios and consolidating smaller rivals in traditionally fragmented sectors. This consolidation helps companies build scale, expand their market presence and enhance operational capabilities, all essential requirements for long-term success in a competitive environment.

Despite frequent challenges posed by economic instability and rising borrowing costs, which can put pressure on the consolidator model, the private equity market has shown resilience, and there is now growing talk of larger consolidator firms beginning to acquire other consolidators – a phenomenon being dubbed the 'consolidation of the consolidators'.

Several sectors, including financial services and accountancy, are expected to undergo a wave of 'consolidation of consolidators' as private equity investments reach maturity and more firms are absorbed, even attracting interest from international players in the US and other jurisdictions.

Sector focus and recent trends in private equity consolidation

Financial services

Despite some market volatility (notably the instability and fallout of the financial markets due to the change in Government with Liz Truss and Kwasi Kwarteng’s mini-budget), financial services has been fertile ground for buy-and-build strategies in recent years.

Independent financial advisers (IFAs), generating revenue through recurring fees based on assets under management (AUM), have seen notable private equity interest as they often maintain a 'sticky' client base with high levels of client retention and limited churn. These fees, therefore, scale with market growth and the bolstering of AUM through bolt-on acquisitions. Investors in turn, are rewarded with predictable recurring revenues and cash flows, and given the fragmented nature of the IFA sector, giving opportunities for consolidation, it is clear to see why this has been such an attractive investment strategy.

Notable recent deals in the industry include the merger of Mattioli Woods and Kingswood Group, as well as the ex-Sovereign-backed Shackleton being sold to US investors Lee Equity Partners.

Accountancy

Interest in professional services, particularly those with accountancy arms and recurring revenues, has also skyrocketed, with as many as 20 of the top 60 firms in the UK being private equity backed. Grant Thornton UK announced their strategic investment with Cinven in December 2024, whilst other firms such as Evelyn Partners, Azets, Cooper Parry and Xeinadin have also seen investment from private equity in recent years.

Regulatory scrutiny and competitive pressures have prompted many accountancy firms to reconsider their traditional models and explore the potential opportunity of being private equity backed. For larger accountancy practices, there is also the possibility of private equity-backed spin-offs (a strategy that has been seen recently with KPMG and Deloitte in the UK), which can unlock growth and enhance operational agility.

The appeal for private equity investors, though, is that many accountancy firms generate consistent income through recurring services like audit, tax, payroll, and compliance. Although the big four take up significant market share, the UK accountancy sector is highly fragmented, with thousands of small and mid-sized firms providing the opportunity of consolidation. Once consolidated, private equity investors can scale operations, centralise back-office functions, help with digitisation and cross-sell services (e.g., wealth management and corporate finance), to boost profitability and ultimately, make the investment a viable investment opportunity to a larger player.

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The private equity landscape in 2025 is expected to continue being characterised by strategic consolidation. For more information or to discuss how we can support your business, please contact your usual Crowe contact. View our Corporate Finance team’s latest deals.