Private equity investment in accountancy firms

Q: What else changes for the firm, its staff and its clients?

Professional status. ICAEW notes that the post deal structure can affect whether the firm may still describe itself as chartered accountants and whether new entities need audit affiliate or other approvals. Probate and other licensed work have their own eligibility rules. Money laundering supervision. ICAEW's automatic supervision depends on the firm meeting its member firm definition, and ICAEW guidance notes that this supervision ends immediately if a firm falls outside it, so check AML supervision before completion. Staff. Where a business transfers to a new employer, TUPE usually moves employees across on their existing terms with continuity of employment. Clients and data. Engagement letters, authorisations and client data have to move lawfully; the steps are set out in selling or closing a practice. Selling partners themselves. They often become employees or directors of the group, bound by restrictive covenants and with less say over pricing, systems and which clients to keep.

Q: How might a sale look for a small firm?

Illustration only. Two directors each own half of a practice company with no audit clients. A private equity backed group offers to buy all the shares. Each director is to receive part of the price in cash at completion, part in shares of the group's holding company, and a further amount after two years linked to fee retention. On the cash element each director considers Business Asset Disposal Relief, having held at least 5% for over two years. On the shares in the holding company they confirm with their adviser whether section 135 applies so that no gain arises yet. They also check that none of their clients is owned by the investor's fund, register the change of control with their professional body, and agree new employment contracts that set out their role for the earn out period.

Private equity backed groups have been buying UK accountancy firms, usually by funding a platform firm that then acquires smaller firms as bolt ons. For partners who sell, the practical changes are in ownership and control, how they are paid, audit registration and independence, and the regulatory status of the firm. ICAEW and the FRC both ask firms to talk to their regulators early, before a deal is signed.

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Why are private equity investors buying accountancy firms?

ICAEW says investor appetite has been driven by perceptions of a fragmented market ripe for consolidation, consistent revenue streams and growth potential, especially in expanding accountancy and related service lines. Its 2025 research on mid tier firms, based on a survey of 36 firms, found that a quarter had secured private equity investment at some point and 86% ranked it among their top three trends driving change in the profession. Of the independently owned firms, 93% had been approached by at least one private equity house in the previous three years, yet for three quarters of them private equity was not an attractive proposition, mainly because of concerns about culture, talent retention and succession to senior roles.

Firms that do take investment cite growth, wider geographic reach and service lines through mergers and acquisitions, access to skills and investment in technology. ICAEW found that almost half of private equity backed firms identified mergers and acquisitions as a top driver of fee growth, compared with 4% of firms without that backing.

How does a buy and build consolidation work?

The usual model is what ICAEW’s Corporate Finance Faculty describes as a buy and build. The investor backs a platform business, which then makes bolt on acquisitions to add customers, markets, skills or scale, with the aim that the enlarged platform commands a higher valuation than the smaller businesses it bought. In accountancy the platform is often an existing mid tier firm that converts from a partnership or LLP into a company owned by an investor vehicle, although ICAEW reported in 2023 that one top ten firm took private equity investment while keeping its LLP structure. Smaller practices are then acquired and integrated into the group’s systems, brand and regulatory arrangements.

For a seller this means the buyer is a group with a repeatable acquisition process, standard documents and an eventual exit plan of its own. The deal terms, and what happens after completion, follow from that.

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How are selling partners usually paid, and how is that taxed?

Consideration can be cash at completion, deferred or contingent amounts, shares in the acquiring group, or a combination. The tax treatment depends on the form:

Cash for a business or shares. A gain on a qualifying disposal may attract Business Asset Disposal Relief. GOV.UK states the rate is 18% for disposals from 6 April 2026. For shares, the company must have been the seller’s personal company, broadly at least 5% of shares and voting rights, for at least two years.
Shares in the buyer. Where a company issues its own shares in exchange for shares in the target, section 135 of the Taxation of Chargeable Gains Act 1992 can treat the exchange as a reorganisation, so there is no disposal and the new shares inherit the original cost (HMRC manual CG52521; see share for share exchange).
Later payments in shares whose value is unknown at completion. HMRC’s guidance at CG58000 explains how section 138A deals with unascertainable deferred consideration satisfied by shares or debentures. Cash earn outs are covered in earn outs and deferred consideration.

Reinvested shares in the group are usually a minority stake whose value depends on the investor’s exit, so sellers should understand the rights attached to them before treating them as part of the price.

What happens to the firm’s audit registration?

This is often the deciding issue. Under paragraph 7 of Schedule 10 to the Companies Act 2006, a firm is controlled by qualified persons only if a majority of its members are qualified and, where it has a board or management committee, a majority of that body are qualified. Majority means holding a majority of the rights to vote on all, or substantially all, issues, or rights enabling a person to direct the firm’s overall policy or alter its constitution. ICAEW explains that majority means more than 50% unless the firm’s constitution requires a higher percentage, and that some firms have thresholds as high as 75% or 100%.

An outside investor will usually want protective rights, and ICAEW says it looks beyond the paperwork: if the firm must go to a third party for approval of something material, the qualified owners may not have unfettered control. The common solution has been a separate audit entity whose ownership and control meet the rules, as ICAEW reported in the Evelyn Partners and Apax deal. Failure to comply puts the firm’s audit registration, and so its ability to sign audit reports after the transaction, at risk.

What does the FRC expect?

On 26 September 2024 the FRC wrote to audit firms and Recognised Supervisory Bodies setting out its approach to external private capital. ICAEW summarises the letter as saying the FRC is not opposed to such investment in principle, recognises potential benefits for audit quality, innovation and choice, but expects risks such as conflicts of interest to be managed. Any audit registered firm considering a change of ownership to introduce private capital should engage with both the FRC and its supervisory body at the earliest opportunity, in confidence. This applies to every audit registered firm, not only those auditing public interest entities.

The FRC has also confirmed to ICAEW that once a private equity fund acquires an audit firm, the firm is prohibited from auditing the fund, the fund’s portfolio companies and their significant affiliates. If the fund or its employees can influence the conduct or outcome of an audit, they may be covered persons subject to the independence requirements of the FRC’s Ethical Standard. Because funds keep acquiring companies, this has to be monitored continually, and an audit practice with clients owned by the same fund can lose them.

What else changes for the firm, its staff and its clients?

Professional status. ICAEW notes that the post deal structure can affect whether the firm may still describe itself as chartered accountants and whether new entities need audit affiliate or other approvals. Probate and other licensed work have their own eligibility rules.
Money laundering supervision. ICAEW’s automatic supervision depends on the firm meeting its member firm definition, and ICAEW guidance notes that this supervision ends immediately if a firm falls outside it, so check AML supervision before completion.
Staff. Where a business transfers to a new employer, TUPE usually moves employees across on their existing terms with continuity of employment.
Clients and data. Engagement letters, authorisations and client data have to move lawfully; the steps are set out in selling or closing a practice.
Selling partners themselves. They often become employees or directors of the group, bound by restrictive covenants and with less say over pricing, systems and which clients to keep.

How might a sale look for a small firm?

Illustration only. Two directors each own half of a practice company with no audit clients. A private equity backed group offers to buy all the shares. Each director is to receive part of the price in cash at completion, part in shares of the group’s holding company, and a further amount after two years linked to fee retention. On the cash element each director considers Business Asset Disposal Relief, having held at least 5% for over two years. On the shares in the holding company they confirm with their adviser whether section 135 applies so that no gain arises yet. They also check that none of their clients is owned by the investor’s fund, register the change of control with their professional body, and agree new employment contracts that set out their role for the earn out period.

What should partners check before agreeing to sell?

Speak to the professional body and, for audit firms, the FRC before heads of terms are signed, not after.
Test the governance against the audit control rules in the firm’s own constitution, which may set a higher bar than 50%.
Screen the investor’s portfolio for audit clients and likely future conflicts.
Model the cash, deferred and equity parts separately, including tax and the risk that the equity is worth less at exit.
Read the restrictive covenants, good and bad leaver terms and earn out conditions, which decide how much of the price is actually received.
Consider the people and culture concerns that ICAEW’s research shows put many independent firms off.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.