Blog Full

Accountancy firm MHA is bucking the trend of professional services opting for private equity investment as its £271m initial public offering (IPO) went live this morning.

The UK arm of Baker Tilly International launched onto London’s junior stock market, AIM, at 8 am.

The firm had a successful year in 2024, as MHA reported that its revenue jumped by nearly 30 per cent to £180m. Over the last four years, it doubled its turnover from £90m (2020) to £180m (2024).

MHA stated it has “a medium-term aspiration to become a top 10 UK accounting and professional services business, generating over £500m annualised revenue.”

To hit this target, the firm opted for external investment.

However, its move to list in the UK differs from the strategy being followed at other parts of the global firm.

UK taking a different approach

At the start of this year, private equity firm Inflexion agreed to acquire a minority stake in Baker Tilly Netherlands. The private equity house said at the time that its share would support the firm’s “growth plans in the region.”

In February 2024, Baker Tilly’s US arm announced an investment from private equity firms Hellman & Friedman and Valeas Capital Partners. The vision behind this investment was to fund its certified public accountant business.

So why did the UK arm opt for public investment? Rakesh Shaunak, managing partner and group chairman of MHA, told City AM it was a “unanimous decision” and “endorsed by the partners.”

The IPO was deemed “the most attractive, sustainable route for the long-term benefit of our people and clients.”

He explained that “for the right firm and the right investor, private equity is a valid option, but for MHA, the higher potential short-term gains from private equity were outweighed by the important distinction that the control of our strategic destiny and planning will very much remain in the hands of our Board and our partners.”

“We will pursue strategic mergers and acquisitions at our own pace,” he added.

Shaunak noted that “going down the IPO route [it] will also give our people a real stake in the future of our business via a significant employee benefit trust.”

“And crucially, it would allow us to offer equity participation to future partners and leaders, ensuring they have a direct stake in the firm’s continued growth,” he added.

Private equity surge in the market

Dan Coatsworth, investment analyst at AJ Bell, told City AM, “The alternative routes to an IPO include selling to a private equity company, yet there needs to be a willing buyer.”

“The accountancy and business advisory sector is certainly on private equity’s radar, but it might be that MHA is not the only potential opportunity around, and there are cheaper or more attractive targets to pursue,” he stated.

Maria Ward-Brennan writes for City AM

Ernst & Young (EY) is set to implement one of its most substantial partner redundancy initiatives in decades, aiming to safeguard profitability amid a sustained downturn in professional services demand.

The firm plans to eliminate approximately 30 partner positions, predominantly within its consulting division, according to individuals familiar with the matter.

Anna Anthony, EY’s managing partner for the UK and Ireland, communicated this strategy to partners earlier this month, though specific figures were not disclosed. ​

EY, employing around 20,000 individuals across the UK, offers a spectrum of services, including auditing major corporations, advising on corporate transactions, business restructuring, and tax consultancy.

Similar to its Big Four counterparts—PwC, KPMG, and Deloitte—EY operates under a partnership model. Its 894 equity partners jointly own and manage the firm, sharing annual profits, while 757 non-equity partners do not participate in profit-sharing. ​

The anticipated redundancies are primarily attributed to a decline in demand for consulting services. During the pandemic, companies heavily invested in consultancy to navigate challenges such as remote work transitions and supply chain disruptions, leading to significant sector growth.

However, rising inflation and interest rates have prompted clients to reduce expenditures on corporate advisory services, resulting in decreased workloads and subsequent job cuts across the Big Four firms. ​

In October, EY reported a 5% decline in average partner profits, reducing the figure to £723,000 for the fiscal year ending in June. Consulting revenues experienced a 4% decrease, while overall revenues saw a modest 3% growth.

To maintain profit margins for remaining partners, the firm has been adjusting its partnership structure, including reducing hiring as senior partners retire and, in some cases, transitioning equity partners to non-equity roles.

Notably, EY’s partnership decreased by approximately 50 members last year, and PwC saw 123 partners depart in 2024, partly due to early retirement initiatives. ​

This planned reduction of 30 partners represents one of the most significant single cuts to EY’s senior ranks in recent history. Such measures underscore the challenges faced by major professional services firms as they adapt to evolving market conditions and client needs. ​

An EY spokesperson stated, “We continually assess the needs of our business and make adjustments when required,” reflecting the firm’s ongoing efforts to align its operations with current market realities.

The broader consulting industry is experiencing similar trends, with firms recalibrating their workforce strategies to balance profitability and service delivery in a fluctuating economic environment

Writes Accountancy Age

The group’s clustering strategy already saw the merging of several units in the Middle East and Africa. Last year KPMG UK also voted to merge with KPMG’s Swiss business

KPMG is set to merge dozens of its national affiliates in a bid to boost growth and prevent audit scandals, according to the Financial Times (FT).

The restructuring aims to reduce the number of economic units from over 100 to as few as 32 by next year, and is expected to be completed by the end of global chairman Bill Thomas’s term in September 2026.

The FT stated that the move marks a new milestone in the partnership’s ‘clustering’ strategy, which has been a focus for the past two years.

The group’s clustering strategy already saw the merging of several units in the Middle East and Africa. Last year KPMG UK also voted to merge with KPMG’s Swiss business.

KPMG, like other Big Four firms, operates as a network of locally-owned partnerships to comply with local auditing regulations and protect partners from liability. 

However, the FT has learnt that as consulting firms increasingly rely on technology investments, KPMG has raised concerns that smaller units “cannot balance these costs with the compliance demands required for audit quality”. 

As a result, executives have stated that firms failing to meet a US$300m (£232.03m) threshold will no longer qualify as full network members, and any mergers will result in profit pools being shared across the involved countries.

Gary Wingrove, KPMG International’s chief operating officer, told the FT: “The fewer business units you have, the easier it is to do business globally.” 

Writes Accountancy Today

The sale of Grant Thornton UK to private equity firm Cinven could be seen as a watershed moment for the UK accountancy market. It’s not just the size, if reports of a £1.3bn deal are accurate, but the shift from a traditional partnership model to a corporate structure that makes it particularly noteworthy.

Lesley Fordyce and Mark Bell, change directors at Equator, examine the shift from traditional partnership model to a corporate structure, and the impact on business owners

Private equity investors are attracted to accountancy firms which already perform well, and which they think can perform even better. One of the benefits of private equity investment is a chunky injection of cash to accelerate market share through acquisitions, new talent, investment in technology, operational efficiencies, and a range of other changes that can drive sales and increase profits.

But nothing comes for free. In return for new-found financial firepower, private equity asks for growth. And it’s not relaxed, easy, a few per cent per year if all goes to plan growth.

It’s intense, urgent, double-digit-whatever-it-takes-growth. That is a very different environment to the one in which most accountancy firms have hitherto operated.

Maintaining the status quo is not something many firms would be happy to accept. It certainly isn’t how private equity delivers value to investors.

Unfortunately, businesses generally tend not to be very good at change. Research published by Harvard Business Review several years ago estimated that something like 70% of deals do not deliver the intended value.

That is not because deals are ill-conceived or because the management team did not know what it was doing. Rather, in the clamour to integrate services, systems and finances, the role of people and the importance of specific change management expertise is usually overlooked.

For accountancy firms which are not quite at the scale of a billion-pound buyout, there is perhaps a temptation to believe that the complexities of change may not apply to quite the same extent. They do. If the point isn’t already clear, private equity investment, by its very nature, brings change on a scale very few accountancy firms will ever have experienced.

So, given these changes, what should leaders of accountancy firms consider before a private equity investment? We suggest the following three for starters:

• go into the deal with your eyes wide open. Have an honest conversation with yourself at the start;
• the success of the deal is driven by a balance between logic and emotional; and
• accept that change needs resource and commitment.

Honest conversations

Before any deal is done, partners must get together and have a really honest conversation about how life might look post-transaction and if they are really, truthfully ready for all that might entail.

Do not think things will roll along the way they always have; that is not what you’ve signed up for. You may have to recalibrate your thinking on what constitutes good performance.

What may have previously been considered a good year could easily look like underperformance post-deal. And ‘good’ isn’t really the right yardstick once a deal has been done.

With a three-to-five-year investment cycle in most cases, private equity partners are looking for a pretty consistent run of ‘exceptional’.

When weighing up a deal, consider what you are going to lose. Partners in professional services firms operate with a unique autonomy. Once a deal with a private equity partner is agreed, the old autonomy changes dramatically.

Once a major shareholder with significant influence over how the firm is run onboard, this changes how decisions are made and how people are remunerated. Even if this is understood philosophically, the reality of it can be a shock to the system.

Psychological impact

This may sound odd, but partners should expect to grieve for how things were. Having observed these transactions many times over – and having been directly involved in a private equity buyout of an accountancy firm – we have witnessed the very real emotional wrench of a deal.

Acknowledging this loss is an important part of being able to fully embrace the opportunity which lies ahead.

Many partners will have been in the firm for decades and see it as part of their personal life story. Why wouldn’t a wholesale change lead to emotional upheaval? Many choose to retire rather than summon the energy for a lengthy period of full-on change; for others, the change is an opportunity to play a role in something significant.

Change is a full-time gig

What tends to happen after a deal is that responsibility for change is done off the side of someone’s desk; a rising star partner (or a less-busy one) is given the dubious honour of leading change with little or no experience of doing so.

There usually follows 12-18 months of gradually dawning realisation that change is a full-time gig, before the business agrees to bring in dedicated resource.

Put significant time and effort into communicating with the rest of the business early and often. Be honest. Your teams are smart enough to realise there is no land of milk and honey, so give them the full picture of the opportunity as well as how things are going to change.

Keep this up once the deal completes and things are underway, even when times are tougher than expected. People can deal with bad news, but radio silence is usually counterproductive.

Getting people to come with on the journey is probably the key challenge, but those running the firm need to be clear on what that journey is going to look like.

The proposed changes will have a significant impact on colleagues’ ability to effect the change while delivering business-as-usual. If you want teams to follow you into this new world, they need to see that the leaders know where they are going.

Private equity investment brings with it huge opportunities, which is why it is playing a bigger role in the future of the UK accountancy market. Preparing for and managing the change is the part most organisations tend to miss, but getting it right will give the business an advantage that few firms ever manage to fully realise.

About the authors

Lesley Fordyce and Mark Bell, change directors at Equator, the digital transformation consultancy

Article appeared in Business and Accountancy Daily