But wait, the implications of these deals extend beyond the boardrooms of the consolidators. In this week’s Decision Line, we follow the domino effect of consolidation and consider whether independents will benefit from the trickle-down effect.

But first, let’s look at the big stories of the week.

***

Editor’s pick of the week

• Affinia buys Wilson Partners in landmark PE deal: It finally happened: a consolidator has eventually acquired another consolidator. Well done to anyone who had Affinia down on their consolidator bingo card as the first to make this kind of deal. While Affinia receives recognition as the first to secure a platform-to-platform transaction in the UK, they won’t be the last.

• Podcast: The deal reshaping accountancy M&A: If you want more behind-the-scenes gossip and reactions, this week’s No Accounting for Taste is completely dedicated to the ins and outs of the Affinia and Wilson Partners deal. James Gosling from AJ Chambers also joins us to give us his take.

Quote of the week

“We had phenomenal interest in the business, and in some ways, that resulted in us feeling that maybe we should wait a little bit longer and finish the job.”

Derry Crowley, the CEO of Xeinadin, told AccountingWEB that the consolidator chose to step away from the sale of the firm earlier this year.

The Financial Times reported at the time that the sale collapsed because the firm’s private equity backer was unable to secure its £1bn asking price.

Want to know what else you missed from the big interview? Check out the video below.

Video: Five key takeaways from interview with the CEO of Xeinadin

1️⃣ The Xeinadin board decided to withdraw from selling the firm earlier this year after receiving “phenomenal interest” and chose to instead “finish the job” and scale the firm
2️⃣ Xeinadin now plans to scale the firm to £300m within the next 12 months
3️⃣ Xeinadin has shifted its acquisition strategy away from retiring partners looking for an exit strategy and now targets high-growth firms with expertise like Accountancy Cloud and Grunberg.
4️⃣ Having recently expanded across London earlier this year and strengthened its presence in Ireland and in targeted regions across the UK, Xeinadin now has Scotland at the top of its acquisition list.
5️⃣ The Xeinadin CEO said the firm is “completely integrated” but acknowledged that due to the rapid M&A growth, integration is an ongoing process.

Read the interview with Derry Crowley in full on AccountingWEB.

Now it’s time for this week’s feature…

Every consolidator deal has a domino effect

Bored of hearing about the latest consolidation deal? Independent firms might shrug, but the domino effect of these deals will affect every firm, for better or worse

The accounting consolidation market has moved into its Champions League era. No longer content with hoovering up independent firms across the UK, the large PE-backed behemoths are now circling each other.

It was only a matter of time before the consolidators would start consolidating. For starters, there are far too many of them. The accounting profession is a healthy industry, but the pool of available firms is becoming as shallow as some reservoirs.

By this point, independent firms should have decided whether they’re going to take external investment or not. The consolidator trend has gone on long enough for those discussions to be had across the boardrooms in the UK.

Of course, situations change and opinions alter. Independent firms are allowed to change their mind. The stigma around private equity (PE) investment has mostly eased compared to the pitchfork-chasing response when the cash first started sloshing around the profession a few years ago. Firms that might have resisted before now see the benefits of joining a larger organisation.

But the fact remains: there isn’t a magic mid-tier accountancy firm tree. So who else is left to feed the insatiable consolidators than other consolidators? Well, it finally happened. To quote the Spice Girls: two become one. This month, consolidating wunderkind Affinia acquired fellow PE-backed Wilson Partners.

When two consolidators become one

Affinia was already growing as fast as a blue whale calf, but with the Wilson Partners deal, the firm skips any teenage growing pains and becomes a massive mammal in the ocean of accounting firms. The group is now worth £160m with around 1,600 employees and 33 offices. Not bad for a brand like Affinia, which didn’t even exist a couple of years ago.

I’d heard whispers earlier this year that a consolidation of the consolidators was imminent. The headaches involved in a transaction of this size made the reality of such a deal questionable. But now that one consolidator has fallen, expect more to follow.

For independent firms not interested in selling, the boardroom deals between consolidators can be a bit like Bristol City watching Paris Saint-Germain battle Arsenal in the Champions League Final and not for one minute expecting to be called on to the pitch.

The news might be shrug-worthy for some mid-tier independent firms, but the domino effect of deals like this won’t be. Regardless of whether you’ve taken PE investment or not, consolidation has reshaped the profession for everyone in it.

As PE-backed General Shermans like Affinia, Azets, Cooper Parry, DJH, Dains and Xeinadin dominate the market, opportunities will trickle the way of independent mid-tier firms. No, independent firms shouldn’t just accept the scraps.

The clients left on the table

For starters, as PE firms scale, could we see them purge lower fee-earning clients? It’s not like the PE firms are accountancy’s Immortan Joe, turning on the taps of unwanted clients to bequeath the masses with the drips and drabs of the profession. No, not at all.

PE value-creation metrics tend to categorise larger, higher-margin clients as more favourable to boost the firm’s overall market value before a flip. Now they’re standing shoulder-to-shoulder with the top 20 big beasts, the client base will likely become of similar ilk.

Independent firms, especially at the smaller end, have the opportunity to pick up clients with more complex needs. This obviously provides the opportunity for higher-value advisory. And let’s face it, clients could just as easily leave without the push if the prices rise or the service slumps compared to what they were used to before the acquisition.

Speaking to Decision Line, James Gosling, managing director of AJ Chambers, has already seen the domino effect of these deals on clients. “On a micro level, we are already seeing Top 10 accounting firms purge some of their clients that no longer fit their modern business model. As this work trickles down, smaller firms are already securing larger fees and are taking on more complex work than ever before.”

A recruitment drive in disguise

Granted, an element of this sounds like: quick, make hay before the big firms abruptly shut the client valves off. But if you follow the theory through, independent firms could also be doused in fresh talent. As Decision Line covered a few months back, talent may not jump for joy in the same way their leadership does when they’re told the firm has new owners. Suddenly, their career plans no longer follow the trajectory they had in mind.

The successful acquisitions work because the two firms are culturally aligned. That’s not always the case, and when it isn’t, some talent may look to find a new home. Naturally, attrition will also happen. Redundancies often occur when two big consolidators merge. Businesses of any kind often don’t have two people doing the same job.

I’m sure plenty of independent firms would be all too happy to open the door to sector specialists. Savvy independent firms can use consolidation as a recruitment drive. Firms that proudly talk about their ‘independence’ aren’t just directing the message at clients.

If you can’t beat them, follow them

Then it’s also a case of, if you can’t beat them, follow them. There is a lot to learn from the consolidators. Gosling believes that independent firms could apply the same dynamics deployed by the consolidators to the mostly untouched smaller end of the market.

“The same dynamics are at play with the smaller independent firms looking at other smaller independent firms and sole traders,” he said. “This part of the market is relatively untouched by the private equity market.”

All that is great, I hear you say, but it’s predicated on the trickle-down economics of consolidation. The effect of consolidation may benefit everyone - or the opportunities are just concentrated at the top with the consolidators.

Independent firms can’t stay idle. If they want to compete, they need strong leadership, a strategy and the impetus to do things differently. “They don’t need the deep pockets of the PE platforms, but they need a clear strategy on technology and artificial intelligence and how they serve their clients and look after their talent,” said Gosling. “It also means that they’re going to have to fight a little differently.”

The AI arms race

The AI and technology strategy is a perfect example of how independent firms can compete without simply throwing cash at the problem. They simply don’t have the scale. But they can’t risk being left behind by these firms. Affinia’s new investor RedBird Capital has a proprietary AI platform, RedBird X.

There is no way an independent firm can compete with this. It’s one of the reasons that made Affinia an attractive home for Wilson Partners. So independent firms can’t ignore the direction of travel. They must have an AI proposition. That means that independent firms may have to strike strategic partnerships with tech vendors or AI firms.

Independents don’t need to match PE money pound for pound; they need to make sure scale doesn’t translate into a technology advantage they can’t overcome.

One superpower: agility

The outlook ahead for independent firms is tough. PE-backed firms have the financial clout to be more competitive, bring in expertise, and they have the size and scale that affords them more influence in pricing and in becoming attractive places to work for new talent. But as Gosling told me, “they’re still a bigger ship”.

“It’s like turning the Titanic,” he said. “If you want to spark change, it may take longer to drip-feed that throughout the culture of the entire business.

“Independent firms will have to work smarter and be acute with how they deploy their cash, but one of their superpowers is agility. Because they are smaller, they’re able to move, bend, blend and mould quicker than some of the bigger firms.”

The domino effect

The point of this week’s Decision Line wasn’t a rallying cry of ‘what have the consolidators ever done for us?’, but to look at the big deals slightly differently.

As the consolidators start to circle each other, the profession shouldn’t look at the Godzilla vs King Kong showdowns as something separate to what’s happening in their regions, but it should still consider the implications - good and bad - when the consolidators consolidate. The domino effect of these deals will affect everyone.

Have a great rest of the week.

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Share

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Speak to any decision-maker, and they’ll tell you that the rise of artificial intelligence means they need different skills from their recruits. Accounting firms need their people to step away from their inboxes and, dare I say, become a trusted adviser. As a result, firms now face a massive hiring challenge as they scramble to recruit an entirely new talent profile. For junior members of staff, it means they have to become advisers much earlier in their careers.

That’s your article this week. But first…

Editor’s pick of the week

• Beyond private equity: MHA’s IPO year in numbers: One year after MHA turned down private equity and floated instead, we caught up with CEO Rakesh Shaunak to see if they made the right choice. Spoiler: with revenues of £250m, they sound pretty happy!

• Manchester calling: AAB targets 200-strong office: AAB is opening a new office in Manchester, but there is much more to this story. An interesting element is explored further in this week’s Decision Line article.

• Mind the advisory gap: UK firms trail European rivals: I apologise for slipping the “trusted adviser” phrase in the newsletter, but I might have to beg for your forgiveness because let’s talk about “advisory”. Yes, new research suggests UK accounting firms are less likely to make advisory a core service line than their European counterparts. I feel this one will prompt lots of eyerolls…

Let’s stay with that advisory article because it’s time for…

Quote of the week

“By the sound of it, advisory work can seem a bit fanciful, like it puts you on a pedestal and makes you feel somehow above the rest (busy churning out the drudgery of compliance work).

“But when it comes time to sell, it’s the compliance factory model, and the recurring fee income that comes with it, that usually determines the value of the firm, not the one-off advisory work done over the years, however juicy, pricey or sizable those fees may have been.”

As you’d expect, the advisory debate erupted again in the comment section. Regular reader taxdigital perfectly summed up where some firms currently are. What better way to spend the summer months than to get into a debate about “advisory”. So send your thoughts on a postcard to the Decision Line PO BOX.

Now it’s time for this week’s big article…

Why relationships are now the whole job

One of the most common themes I often hear from firm leaders is that the accountant of tomorrow will look very different from the accountant of yesterday.

The stereotype of the accountant hunched over an Excel spreadsheet is no more. Who could forget Mr Anchovy, Michael Palin’s buttoned-up accountant in that Monty Python sketch, dreaming of becoming a lion tamer because accountancy was “so desperately dull and tedious and stuffy and boring and des-per-ate-ly DULL”.

That stereotype no longer reflects the reality of a modern practice. Today’s accountant is expected to spend more time actually building relationships. The message has been repeated ever since cloud accounting took off, leading to terms like ‘trusted adviser’ and ‘advisory’ becoming as synonymous with tech conferences as swag bags and tech bro gilets.

A relationship job

To be fair, accounting has always been a relationship business. Artificial intelligence (AI) hasn’t changed that; it’s simply made relationships the most valuable part of the job. With automation and AI absorbing the grunt work, accountants can no longer hide behind a spreadsheet or emails.

Firms now expect those entering the profession to become advisers much earlier in their careers. The shift has only created a new kind of recruitment headache.

I recently spoke to Chris Harland (pictured below), the head of North West at AAB, ahead of the firm opening a new office in Manchester. Naturally, the profile of an accountant came up in conversation since AAB plans to scale the office to 200-plus people.

Harland perfectly summed up the current landscape for accounting firms like his. “I see that the profile [of an accountant] changing now because tech will support much of what we used to expect people to do,” he said. “We are now expecting them to be advisers much earlier in their careers. It’s becoming much more relationship-focused.”

The evolution of the profession

Harland isn’t alone. The recent ICAEW Evolution of mid-tier accountancy firms research reached much the same conclusion.

Of the 35 firms taking part in the study, 83% of respondents accepted that the role of the accountant will pivot from compliance and reporting to “judgement, systems thinking and ethical oversight by 2030”. In short: more relationship-focused.

But that’s not all. The ICAEW reported how the make-up of accountancy firms is changing in other ways. According to the research, 74% of firms expect to increase hiring of people with expertise in specific areas, led by data analytics and technology.

When I raised this with practice leaders recently, the revelation was met with an eye roll. One senior leader told me that they’ve had data analysts for years, suggesting that firms have been preparing for the evolution of an accountant for some time.

Clearly the profession knows things are changing, but that doesn’t make the thorny issue of recruitment any easier. For years, firm leaders have struggled to find the right people. The rise of artificial intelligence may have eased the strain in some parts of the business, but it’s just created another layer of recruitment complexities.

The phone before email dilemma

At trainee level, firm leaders can get the intake through the doors, but that’s only half the battle. The profession might now prioritise relationship-building, but those coming into the workforce might not be up to this way of working.

I’ve spoken to exasperated firm leaders who have highlighted the same barrier: their people hiding behind emails rather than picking up the phone. Long gone are the days of every desk having a landline. This was such a problem for one firm that they’d gone as far as implementing a phone-before-email KPI.

Hitting them with a stick until they pick up the phone is one way to change behaviour. But to meet what firms need right now, they need a culture change - and that means thinking beyond the traditional learning and development.

From back office to front of house

Peter Gallanagh (pictured below), the UK and Ireland CEO for Azets, recognised that a different pathway was needed, and is looking towards the hospitality industry for inspiration.

In an exclusive interview to be published soon on AccountingWEB, Gallanagh told me: “We need people that have front of house skills and know how to speak to clients with a mindset that is about service excellence.”

The people Azets is looking for, he said, should know how to build strategic partnerships and know the difference between transactional relationships and genuine trusted adviser relationships.

The phrase ‘front of house skills’ shouldn’t be overlooked. One of the ways Gallanagh plans to instil this mindset into his new recruits is to second them to a hospitality business. You might ask what pulling pints has to do with accountancy? Well, according to Gallanagh, quite a lot!

“The hospitality industry has got it right because they’re all about excellence - and that’s what we need from day one,” he said. “It’s that ability to speak to people, the ability to ask and build rapport and manage difficult conversations when they arise.”

Azets is currently in conversation with four sizeable UK businesses to bring this secondment to life. “I’m not the sort of person who says things for show,” Gallanagh said.

“It’s common sense that if we’re taking people away from the back end, we get them at the front end. They need to be much more focused on client service. Where’s the best place to get that expertise? It’s in hospitality. It’s nowhere else.”

The bottom line

Gallanagh’s proposal may sound unconventional, but it only underlines the direction of travel. The rise of AI is often spoken about as a technology change. But actually it’s a change management and people problem for firms.

The profile of the modern accountant has changed. It makes sense. Technology has commoditised compliance, while AI is becoming embedded across the end-to-end compliance workflow. So if everything has become homogenised, what do firms have that differentiates them? The obvious answer is their people.

This means recruitment will have to adapt. Technical competence remains as essential as ever, but soft skills, communication and commercial awareness are now equally critical. Junior members will need to get up to speed quickly and feel comfortable leading meetings, building trust and having difficult conversations with clients. For starters, they just need to pick up the phone.

That stereotype of the buttoned-up accountant really does belong to another era. Which makes me wonder: would Mr Anchovy still invest in that lion taming hat?

Have a great rest of the week.

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Share

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Menzies is the latest firm to get the recognition. So this week we caught up with Menzies’ managing partner Simon Massey to understand how the process helped the firm integrate a major merger, sharpen its employer brand and unlock a new ESG service line. But first…

Editor’s top picks

Here are the big stories decision makers ought to read on AccountingWEB this week.

• Podcast: Rolling out tech without rattling clients: How can firms ensure technology improves the client experience rather than complicates it and can such a step be taken without affecting that relationship? David Gartside and Luke Farren join The Progressive Firm Podcast to discuss.

• Hire the whole, not the highlight: No accountant has it all, but the right team can. The trick is to balance talents rather than chase a single star, however dazzling they look on paper.

Quote of the week

“You don’t need to be convincing people that we’re using technology. I think clients are expecting that, as I keep labouring. But for me, I think ensuring that you are communicating the reasons behind why you’re doing it.”

Appearing on the latest Progressive Firm podcast, Luke Farren, the founder of the Modern Firm, discussed the difficulty some firms have in rolling out new technology without upsetting clients. This comes up a lot when firms discuss artificial intelligence. I always hear push back from firms concerned that clients will start asking for fee deductions.

As Farren explained, the art of mastering this client conversation is to be completely transparent and upfront about the reasons behind this. The clients are probably using AI tools themselves so they’d have to expect their accountants to do the same.

Right now over to our big story of the week…

The hidden upside of Menzies’ B Corp certification

Menzies became B Corp certified last month, making it one of 37 accounting firms in the UK to earn the status. The certification is awarded to companies that meet high standards in social and environmental performance, transparency and accountability.

It’s a genuine achievement, and is often treated as a sustainability badge, but that’s not really the whole story. It also makes for a useful framework for accounting firms grappling with the current challenges of mergers and acquisition, recruiting and retaining talent and establishing new service lines like sustainability reporting.

The accreditation arrived not long after Menzies merged with Beever & Struthers. The deal truly turned Menzies into a national firm worth £110m with over 1,000 employees, extending its reach up the M6 into Manchester.

As private equity-backed consolidators grow larger and swallow more of the market, Menzies has remained fiercely independent. Seen through that lens, its B Corp certification helps the firm stand out - both in the market and in the competitive recruitment landscape.

I caught up with Simon Massey (pictured below), the managing partner of Menzies, shortly after the announcement. What became clear was that the benefits of becoming B Corp extend well beyond the badge. The process itself actively helped improve the organisation, sharpened its point of difference and fortuitously supported the integration of Menzies and Beevers & Struthers.

Starting the journey

Menzies began the journey two years ago when they brought in consultants to guide it through the process. That was the first sign that the road to the certification delivered more than just the badge at the end of it. The consultancy process opened the firm’s eyes to the additional services it could offer that it hadn’t previously considered.

“As a mid-sized firm you sometimes wonder your value as a consultant,” explained Simon Massey, the managing partner at Menzies. “We do the accounts, we do tax advisory and consultancy, but the process made us realise that people do want to pay experts for profit consultancy.”

The consultants took Menzies through a wide-range of questions, from its policies for young people to their approach for certain kinds of clients. “It actually gave us prompts to make our business - and our employer brand - better,” said Massey.

In the end, the firm had to change very little. The B Corp movement originated in the US where rights around maternity and employment are well less established than they are in the UK, where they’re already built into most companies’ DNA.

But then, the B Corp certification is not the firm’s only people-centric recognition either. Menzies has featured in the Sunday Times’ best places to work list for three years running. The ranking is largely built on an anonymous staff survey, which Menzies has integrated into its own internal polling. Employees answer 20 core questions without knowing which ones feed directly into the Sunday Times best places to work survey.

The firm recorded a 70% response rate. An exceptionally high response rate like that could either mean people are very happy or extremely unhappy. For Menzies, it was the former: they had lots of positive feedback and constructive comments. The process effectively becomes an internal accreditation. The staff are telling the firm it’s a good place to work. And constructive comments help make the company better. That all feeds into the B Corp certification.

Together, the B Corp accreditation and recognition as a Sunday Times Best Place to Work help set the firm apart when attracting new talent. Massey believes the “war for talent” has eased, but it has been replaced by a different challenge: economic uncertainty has made professionals more risk-averse and less willing to give up the security and employment benefits they have in their current roles. In this environment, Massey says, the B Corp badge can make a meaningful difference.

“If we’re then targeting someone in another organisation through a head hunter or our internal recruitment, the B Corp certification demonstrates that we’re worth it. It just kicks the door further open,” said Massey.

Mergers and acquisitions

The B Corp certification is also useful if you’ve just gone through a merger or acquisition - just like Menzies has. To some extent, the process becomes a playbook to help navigate the post-acquisition integration process.

“One of the selling points behind B Lab, the global nonprofit behind Certified B Corporations, is that if you’re doing mergers or acquisitions, the process essentially gives you a checklist,” said Massey.

Sure, the due diligence process explores the culture fit of the two organisations, but nobody really knows how things will go until the logos change. Up to that point, each side still has their own distinct values. The B Corp checklist helps get the merged organisation onto the same script.

A merger essentially combines the best parts of two organisations and brings them together. “You’ve got to go through the granular stuff like contracts, the software you use and all the general practice hygiene, but it’s really important. You don’t get any real synergies in a merged business unless you’re all on the same platform, same systems, and have the same approach and ethos,” said Massey.

Menzies naturally did this with the Beevers & Struthers deal. “Both firms are metropolitan in their thinking. So if you walk around a legacy Beevers office in Manchester or Birmingham, or a Menzies office in Woking or in Staines, the people will look the same, the demeanour will be the same and their approach will be the same,” said Massey.

But not every merger runs smoothly. “Different situations will present themselves,” said Massey. “More often it’s the human stuff. We’re all fundamentally can-kickers. If there’s a difficult conversation, we don’t always have it. But sometimes you’ve got to deal with those difficult conversations.

This is where the B Corp ‘checklist’ comes in. Every merger is different, and the framework is not intended to act as a rigid code of conduct. Instead, it provides a structured approach that helps firms systemise the integration process and ensure key considerations are not overlooked.

To get everyone singing the same cultural hymn, Massey prefers to lead with a purpose or a value set rather than a code of conduct. He sees this framework as empowering people in the organisation to live by the values of the organisation.

“Every office is reflective of the people there; the banter and the conversations you have in one office will be very different from the conversations you might have in another. But fundamentally, there are a set of core principles and values that are actually similar.

“My mantra is: we employ grown ups so let’s treat people like grown-ups. Then you just need to call out the 1-2% that aren’t playing by the value set.”

Growth with a new service line

So far, our conversation has focused on the internal benefits of the B Corp accreditation. But the decision to pursue it has external benefits too. Menzies had already set up an ESG service line but this project was turbocharged last year when Menzies acquired Gran Sustainability.

Gran had already established a strong reputation for end-to-end ESG and sustainability services spanning corporate strategy, materiality assessments, supply chain sustainability, carbon footprinting, and net zero roadmaps.

The B Corp certification is another step in growing this specialist advisory team. As new sustainability reporting standards and disclosure requirements start to take shape in the UK, Menzies sees further opportunities ahead. “It’s not just sustainability reporting, but there is a massive opportunity for us to provide advice; ESG is not just environment, but also social and governance,” said Massey.

The world and the route to market is changing. This new specialist service line opens the doors to a different way of serving clients in the future. As such, Massey sees the role of accounting firms evolving into something closer to the project-based work more common in the legal sector.

“You’ll have a bank of clients but you won’t be doing the same tasks for those clients every year. You might do one project for that client one year and then a different project the year after and a different project the year after that. It almost becomes a portfolio approach. That project-based work is probably where we need to go as a profession,” said Massey.

That approach almost takes us full circle to the start of Menzies’ B Corp journey, when the consultancy process became a lightbulb moment for Massey in the potential for different services the firm could offer clients beyond the usual tax and accounts.

The values that underpin the certification

That right there underlines the impact of pursuing an accreditation like B Corp. Of course, the certification demonstrates Menzies investment in ESG and sustainability services and also validates and supports the firm’s values. But the certification goes beyond that.

It’s the by-product of the certification that really shapes the company. The process pushes the firm to meet high standards across the business, and for a firm that has recently acquired and continues to scale, the framework only further entrenches the firm’s values.

For a firm determined to stay independent, the B Corp certification is yet another way to stand out. And those values are only going to become more important as consolidation sweeps through the market.

Those by-products are valuable, but the underlying point is far simpler. For Massey, the real achievement is the recognition that Menzies is a great place to work. He would say that, of course - but the certification backs up the claim.

“I’ve worked here for 23 years. I think it’s a great place,” he said. “I really love it. I’ve worked in other places, but this is the best place I’ve ever worked. Anyone who’s worked anywhere else and comes into Menzies always says it’s the best space I’ve ever worked. I know that, but actually it’s quite nice that other people are kind of saying it, and it just helps having that badge out there.”

Have a great rest of the week. I’ve packed my bags and I’m now off to Xerocon, so if you see me there, please say hello.

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Share

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

She returned with a notebook full of insights, anecdotes and analysis about the complicated picture behind each deal. This week, she shares her notes and explains why growth alone isn’t enough for private equity buyers.

But before I hand the newsletter duties over to Joanne, let’s take a look at the big stories for decision makers this week….

Editor’s picks of the week

• Baker Tilly International CEO on AI, talent and PE shake-up: Francesca Lagerberg outlined her strategy to reach a $12bn revenue target by 2030. As is the case with most firms, there are hurdles aplenty, with AI, private equity and talent shifts all coming to the fore. Interestingly, Lagerberg is using an AI-powered simulator to sharpen her presentation skills and prepare for difficult client conversations, while the conversation also turned to getting more women in leadership positions.

• TC Group turns to CRM after acquisition spree: Top 20 firm TC Group’s rapid expansion has created the kind of data and onboarding puzzle many consolidators face. To keep pace with its mergers and acquisitions without flattening local autonomy, the group has turned to specialist accounting tool FibreCRM.

Quote of the Week

“Some of these deals are so big that who’s going to buy them? An IPO might be the most logical flip because some of these valuations will be in the billions, and there isn’t going to be a ready-made buyer.”

In her recent interview with AccountingWEB, Francesca Lagerberg really opened the debate on what the endgame could look like for some of the big players in the current consolidation craze.

As we all know, private equity-backed consolidators have grown at a remarkable pace. So much so that some senior leaders I’ve spoken with have questioned just who will be big enough to acquire these firms.

Lagerberg floated one compelling answer - quite literally. She said that an IPO could be a credible exit route for consolidators. The UK accounting scene hasn’t seen many IPOs.

MHA, one of the firms in the Baker Tilly International network, stands out as a rare exception after it chose to float rather than take private equity investment. So could we see more of this? As consolidators continue to grow, Lagerberg’s prediction could become a reality.

Right, now over to Joanne for this week’s big story….

Private equity is reshaping the accountancy market at pace. But recent deal activity suggests the gap between growth and value is wider than many firms think.

Private equity is no longer a fringe dynamic in accountancy. As James Jarman (pictured below), a partner at Galloways Accounting, puts it: “You can’t walk into a room of accountants and not speak to at least one, if not more, that have firms that have been bought by private equity”.

Jarman was speaking at a fireside chat at a recent IRIS Connect event in Manchester. His Sussex-based firm, backed by Cow Corner, has around 300 employees after having spent the past five years acquiring practices and integrating them into a wider group. That experience gives him a practical view of what sits behind the current wave of deal activity.

On the surface, the market looks strong. Large transactions continue to go through at high multiples, and private equity remains firmly on the strategic agenda for mid-tier firms. Data from the ICAEW shows 86% of mid-tier firms rank private equity as a top-three driver of change. But recent events suggest a more complicated picture, and not every growth story converts into value when tested.

The integration gap

The attempted sale of Xeinadin - which was paused in early February after its private equity owner, Exponent, failed to receive bids that met its target valuation of over £1bn - brings this into focus. Built by combining more than 100 firms, it was positioned as a scaled platform, but when taken to market, buyers stepped back.

Jarman explains: “They bought the revenue, but underneath the surface, they were independent firms.”

That distinction runs through much of the current PE landscape. Bringing firms together is relatively straightforward. Making them operate as one business is not, and where that does not happen, the overall revenue numbers can mask a more fragmented reality: different systems, different processes, and, more importantly, different ways of working.

Jarman continues: “Xeinadin is a real cautionary tale in that if you don’t do it right, if you try and buy a load of things and stitch them together… that cultural fit, that operational fit [isn’t there]… We’ve seen that when people were kicking the tyres of this deal, it just wasn’t adding up.”

What buyers actually look for

The fundamentals of valuation are well understood across the profession. Buyers look for recurring revenue, a balanced client base, scalable systems and a growing advisory offering.

In practice, though, Jarman’s starting point is more immediate. He says: “For me, the real value is always going to be in the people.”

At Galloways, assessing a firm begins with its leadership. Not just who is in place, but how they operate and whether they are aligned. “When you’ve got someone pulling in the wrong direction… they can be quite disruptive,” he says.

By contrast, operational weaknesses are often seen as manageable. “If they’re paper-heavy… and they don’t have good systems in place, well, that’s an opportunity for us, because we can move them onto new systems. We can improve that efficiency. We can make them a lot more streamlined, a lot slicker in that process. So, actually, that’s a good reason why I might take on a firm. But what I can’t change easily is the people.”

In other words, not every weakness reduces value; some increase it, if they can be fixed post-acquisition.

The valuation gap most firms sit in

That difference shows up in valuation, where firms are judged less on headline growth and more on how the business actually operates.

Practices that remain heavily dependent on core individuals, with manual processes and limited digital infrastructure, tend to sit at the lower end of the valuation 4-6x EBITDA range. As firms move towards more standardised, cloud-based models with stronger team structures and some advisory capability, that tends to increase to around 6–8x.

Beyond that, firms that operate with integrated systems, low key-person risk and a repeatable delivery model move into the 7-10x range, where private equity platform deals are typically struck.

The highest multiples, 14-17x, are reserved for fully integrated platforms that can scale and acquire without significant disruption. This is what Exponent, was after for Xeinadin, with a valuation of over £1bn, based on a projected EBITDA of roughly £60m.

Where deals break down

The same issues tend to surface when transactions fail, and key-person dependency is among the most common. In those situations, the underlying business has not been built to operate independently, and that creates immediate risk for any buyer.

A lack of reliable data and operational visibility is another pressure point. Firms may be able to describe strong performance, but without clean, consistent data to support it, buyers struggle to validate what they are being told.

As Jarman notes: “We’re very good, as accountants, at focusing on positives. To go: look at our wonderful recurring revenues, look at our growing client base, look at our incredible staff… all working really hard, very chargeable, very recoverable. But if you haven’t got the data to support it, well, I’ve got no proof points, and it makes us very nervous.”

Partner dependency

Most of this comes back to how much of the firm still sits with a small number of partners. In many practices, key client relationships remain concentrated, and decision-making is still anchored at the partner level.

“If your client isn’t confident in your team, and they only see you as that firm, then you’ve got a problem,” says Jarman.

In larger firms, that shows up less as a single-founder issue and more as a capacity constraint. Growth is possible, but only up to the point where the existing partner group can support it.

Jarman links that directly to succession. In his view, many firms have not built enough depth below partner level to support transition. “They don’t really have a succession plan… they haven’t spent the time to train and coach the next generation,” he says.

At the same time, traditional internal succession routes are becoming less viable too, with fewer partners willing to take on the financial risk. As he put it, “Nobody really wants to take out a personal guarantee on the home anymore to buy the equity of the firm.”

That combination is pushing more firms towards PE as an option, not always as a proactive growth move, but because the alternatives have narrowed.

The cost of fragmentation

A more persistent constraint underlies many of these conversations: the fact that many firms are still fragmented in practice. Multiple systems, partial integrations and manual workarounds are common, particularly in firms that have grown through acquisition.

Jarman was realistic about that challenge: “I would be very impressed if any sizable firm was able to fully integrate all of their systems without some manual workaround at this point in time.”

On its own, none of this necessarily stops a firm from growing, but it does make the business more difficult to run, standardise and integrate when further acquisitions are added. It also becomes more visible from the outside, where buyers are assessing not just performance, but how cleanly the business runs.

Whether a firm is actively looking at private equity or not, the same fundamentals apply. The work is in building a business that can operate beyond its owner, with a team, systems and structure that hold together under pressure. Firms that do that are easier to scale and easier to run. If the time comes, they are also the ones that command the highest valuations.

Have a great week,

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Share

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

On stage with me at the National Gallery were Natasha Frangos, the managing partner at HaysMac; Emma Green, a partner at Wellden Turnbull; and Joanne Kingsnorth, the managing director at Seymour Taylor.

The firms are of different sizes, but the headaches are the same. They talked about their barriers to growth – talent constraints, artificial intelligence, the constant treadmill of compliance struggles and market consolidation. These challenges are unavoidable, but it’s how you approach them that makes the difference. That’s the big story in today’s edition, but first…

Editor’s picks of the week

Here are the most-read articles published on AccountingWEB this week for decision-makers.

• The High Performance Podcast’s fix for accounting’s talent crisis: Coinciding with the release of the Accounting Index Report, which highlighted the strain the talent shortage is placing on firms, the hosts of the High Performance Podcast shared some timely lessons with the attendees at gbX 2026 about agility, resilience, having a growth mindset and creating a high-performance culture.

• The accountant of 2036 will need more judgment, not less: For all the talk of AI and automation, the more useful question for accountants is where their value sits as software takes on more of the process.

Let’s see what quotes I overheard on my travels this week…

Quote of the week

“Lots of firms talk about growth, but what does it actually mean? Are they talking about organic growth, acquisitions or… what? What do they consider to be success?” - an attendee at the gbX event.

I paraphrased the above quote, but the sentiment is the same. Growth is the dominant conversation in the profession right now, and today’s article makes that case clearly. But as more firms talk about it, the word needs more fine-tuning.

Indeed, I spoke to a vendor who asks every accountant they work with what their goal is, and without fail, every one responds ‘growth’. Funnily enough, when the vendor presses the client for what they mean, they don’t actually know. You know, just everyone else says it…

So what does growth mean to you? Answer on a postcard.

Now back to the National Gallery, where you get a front row seat to the panel I held at gbX…

Growth starts with getting people right

Talk to any firm leader these days, and you hear a lot about growth. But behind the big numbers lies a more complicated reality.

Three practice leaders joined me on stage at Advancetrack’s gbX event in London this past week, held at the National Gallery, to discuss how they’re overcoming barriers to growth.

The panel was titled ‘The Growth Paradox’, though what was striking was how the discussion kept returning to people. For all the talk in this newsletter about scaling and the multiples that accountancy firms have sold for, the conversation never devolved into Top Trumps-style obsessing over acquisitions. In fact, no one even mentioned war chests of cash. The central theme was simple: get the people strategy right, and growth will follow.

Each is at a different stage of their growth journey: Natasha Frangos is the managing partner at HaysMac, a 650-person independent firm that’s achieved 5% annual growth over the past four years; Emma Green is a director at Wellden Turnbull, a 65-person, single-office firm that has grown organically; and Joanne Kingsnorth is managing director of Seymour Taylor, which took private equity investment last autumn.

Their paths differ, but the challenges are similar: capacity constraints, volatile market conditions and disruptive technological change have all become barriers to growth – or opportunities, depending on who you talk to.

The capacity crunch

The event coincided with the publication of Advancetrack’s Accounting Talent Index, which proved a useful companion to the on-stage conversation, with its statistics adding weight to the capacity struggles the panel described.

One striking finding from the report was how 72% of firms believe the talent shortage is having a severe impact on their business, with 70% citing it as one of their biggest barriers to growth.

Frangos (pictured above) explained that HaysMac is focused on sustainable growth because it doesn’t want to lose sight of the firm’s culture. And that means creating an environment where talent can thrive and feel they can progress in their own careers.

To relieve talent constraints, the firm has also opened an office in South Africa. Originally conceived to address a shortage of audit talent, the Cape Town office has grown to more than 70 people and expanded into other service lines. Notably, audit has struggled to attract the right talent. The Accounting Talent Index bears this out, with two-thirds of firms reporting difficulty in recruiting in this service line.

Green highlighted how Wellden Turnbull has prioritised growing its own talent. Although that strategy has faced a setback with changes to the Level 7 apprenticeship levy, which she acknowledged will make this approach more expensive going forward.

For Kingsnorth, Seymour Taylor’s talent challenges are compounded by its proximity to London. Unable to compete on salary, she emphasised the importance of brand and culture in attracting new candidates.

Frangos agreed. The people HaysMac interviews are interested in the culture and the purpose, not the noise around the firm’s growth story. They want to understand the environment, rather than the headline figures.

Their focus on culture sits in sharp contrast to some of the alarming statistics in the Accounting Talent Index. The report found that 23% of firms have seen an increase in burnout rates, with 26% of respondents concerned that the mounting workload is driving people out of the profession.

What was telling was how each leader’s commitment to their people was rooted in personal experience. Green (pictured above) recalled a story she shared previously here on Decision Line about when, as a trainee, she watched a team leader read their children bedtime stories over the phone in the office. “Not exactly inspirational,” said Green. Quite.

The conference theme was building high-performance teams (with the hosts of the High Performance Podcast waiting in the wings to give the keynote, what else could the theme of the day be?). For Frangos, a key part of achieving that is ensuring her people understand the firm’s strategy. The aim here is for individuals to understand how their role connects to the firm's broader goals.

HaysMac also runs a mentoring programme that pairs people with a director or partner outside their immediate team, so someone looking to develop business development skills, for example, works with a mentor who isn’t their line manager.

Smaller firms like Wellden Turnbull don’t have the luxury of a Cape Town secondment or a structured mentoring programme with people not in your day-to-day environment. But that doesn’t mean high-performance isn’t embedded in the culture. Green noted that the firm’s flat hierarchy limits the number of promotions available, so instead it focuses on people’s interests.

In one example she shared, a team member with a passion for artificial intelligence (AI) has been encouraged to explore different software and investigate what the technology can bring to the business. High performance is spotting untapped talent and giving the team a psychologically safe environment to chisel their skills.

Technology, AI and alternative resourcing

That led naturally into a discussion about AI. With talent constraints pushing firms to look for ways to carry the load, AI seems like an obvious answer. Yet apparently, resistance remains.

The Accounting Talent Index found that only 16% of firms are actively investing in AI, and in the UK, that figure drops to 11.5%.

Last year’s Accounting Excellence research found firms using AI mostly to draft emails and handle research queries. At the conference, conversations had moved on to how tools like Claude had become part of firms’ workflows, but everyone still recognised that the human premium isn’t going anywhere soon.

Kingsnorth doesn’t buy the fears that AI will take accountants’ jobs either. “AI is just a different tool for our professionals to use,” she said. “It’s more important that we use our people correctly in forging and developing relationships.”

Green agreed, acknowledging that some team members worry that AI might eventually take their jobs, but she reasoned that the profession shouldn’t bury its head in the sand. “Our clients are using AI in their own industries,” she said. “People get used to getting things straight away. They’ll expect us to use AI in the next couple of years or sooner, and it’ll have to be part of our normal process.”

For firms to use AI effectively, the leaders agreed that the environment and culture matter as much as the technology. “The pace at which certain firms [adopt AI] will be different, but [success] depends on the environment the firm has created,” said Frangos. That means encouraging curiosity.

It also means bringing the whole business along in the journey. HaysMac recently made AI training mandatory, ensuring everyone understood the firm’s AI policy, what data they can put into AI tools, and how to escalate a problem. The firm has also set up an AI committee to join the conversations after having found that activity across the business was becoming disjointed

The committee has slowed the progress, which might have caused some frustration from those wanting to go faster, but Frangos sees the AI committee as an essential backstop. “It’s absolutely the right thing to do to ensure we’re rolling out the right products responsibly, and the ones that will have the maximum impact,” she said. “We don’t do AI or automation for the sake of doing AI or automation - what’s the actual benefit that it’s going to bring?”

AI is not the only pressure valve. According to the Accounting Talent Index, 31% of firms have adopted cloud or practice management technology in response to the talent shortage, while 24% have outsourced or offshored tasks.

Compliance, consolidation and opportunities

Of course, growth doesn’t happen in a vacuum. Firms can control how they respond to the talent crisis or how thoughtfully they adopt technology, but external factors are another matter. Regulatory and compliance changes, alongside the market consolidation, present both barriers to growth and opportunities.

The rollout of Making Tax Digital for income tax, increased anti-money laundering (AML) scrutiny, and Companies House reforms have all added to the administrative burdens. For Kingsnorth (pictured above), the upside is that these changes open conversations with clients about how the firm can help and present growth opportunities, but they also bring the risk of scope creep.

“We have nothing to sell but time,” she said. “So we make sure the entire team are aware of scope creeps.” Seymour Taylor uses GoProposal for fee standardisation across the firm. “That’s been really key for us in making sure that everyone gives away the same services for a price that doesn’t give it away for free. Because what one person sells as an account package isn’t what everyone else sells as an account package.”

Regulatory changes can also create new service line opportunities. HaysMac has seen growing interest in its risk, assurance and advisory team as a result of the changing business landscape and the ever-present risk of cyber-attacks. “Boards are looking at their risk registers a lot closer than they had to previously, said Frangos. “The range of risks is so wide, and so that’s an area that we’ve been investing in.”

No discussion on growth would be complete without addressing consolidation. Mid-tier firms in particular have found themselves in the sights of private equity-backed consolidators, and as we’ve discussed at length in this newsletter, the M&A market has shaped firms’ futures and growth prospects, whether they’ve taken investment or not.

Seymour Taylor accepted private equity backing in November. Kingsnorth described the lengthy “beauty parade” of meeting interested parties before selecting the right partner. On that point, she emphasised how finding the right partner is key to the success of the relationship.

Seymour Taylor opted for a regional hub model, rather than a national hub, which allowed the firm to preserve personal relationships with both the team and clients.

HaysMac, meanwhile, remains independent. Frangos suggested that has itself become a differentiating factor. “Regardless of whether you’re PE-backed or not, the challenges we face as an industry are common ground,” she said. “The next question is whether you tackle those challenges with an external partner or whether you have enough momentum, bandwidth and resource capacity to navigate them yourself. At the moment, we feel we do. But it’s really important that we move at a pace, remain agile and retain our talent.”

People strategy and growth are the same

I closed the panel by asking each leader for their key takeaway. The response was unanimous and telling about their growth strategies. None of the panellists discussed three-year plans or acquisition plans. All three recognised culture and people as a driving force behind growth.

As Frangos put it: “The culture of the business is really important because it’s what people buy into. It gives our people the vision to understand what trajectory the business is on and in understanding what role their contribution makes in helping the business develop.”

When you think of people as the engine of growth, the capacity challenges and talent shortages suddenly feel even more consequential.

Of course, commercial clarity, strong leadership, process discipline and making difficult operational decisions are the key drivers for growth. But it takes a well-rounded approach to grow a business. A people strategy is just as important.

This week’s Decision Line is brought to you by the Accounting Excellence Awards.

Entries are now open for the Accounting Excellence Awards. This is your chance to showcase the work, progress and results that set your firm apart. Enter the awards and put your achievements in front of the industry.

The Accounting Excellence Awards include categories for client service, firm of the year, employer of the year, service line awards and deal of the year. Start your entry today!

Have a great week,

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Share

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Congratulations to the leadership team at Affinia. I imagine there were more than a few champagne corks popping at the South East HQ last week - and rightly so. The team took a firm in the single-digit millions and scaled it to £100m in three years.

Affinia’s CEO Darren Redmayne told me that the firm never set out to be the fastest-growing private equity-backed consolidator in the market. Well, they sure fooled me!

In three years, Affinia grew from £32.4m in fee income to £57m last year, before breaking the £100m barrier with the acquisition of three UHY Hacker Young offices. The numbers speak for themselves. It’s no wonder they caught the attention of RedBird.

So this week, we’re delving into that deal and exploring why this is positive news for private equity firms looking to flip and how investments like this could accelerate the use of artificial intelligence in the profession. But first…

Editor’s picks of the week

Before we dive into this week’s exclusive insider analysis, here are some of the must-read articles published this week on AccountingWEB for decision-makers.

• The progressive firm podcast: Dealing with difficult clients Matthew Ord returns to the AccountingWEB podcast studio to tackle the thorny topic of clients. He’s joined by Muntazir Bhimji, a partner at Macalvin, and Natasha Millward, the client services director at DJH, to discuss client horror stories and the strategies used to strengthen those relationships.

• Sage: “We’re building AI for people doing serious work” Sage used its flagship event in San Francisco to move its AI pitch beyond chatbots into agents, workflows and implementation tools. AccountingWEB’s Tom Herbert hailed a Waymo and headed to the venue to see what these tools mean for accountants.

Quote of the week

“Big accounting firms should start to think of themselves as a data business, more than a services business.”

This is an interesting point raised to me as I was making calls about this week’s Affinia deep dive. I thought this comment was worth highlighting because it underlines a philosophical shift some firms may need to make in the near future.

Data will only grow in importance as artificial intelligence gains more influence in the profession. I touch on this briefly in the article below, but I fully expect I’ll come back to this theme in the coming weeks. Get in touch with your thoughts!

Now over to the big story of the past week: the sale of Affinia to RedBird Capital….

RedBird snaps up Affinia after £100m surge

When Sovereign Capital invested in the firm that would become Affinia three years ago, it had a clear buy-and-build mission in mind. In that short time, Affinia has scaled from single-digit millions in revenue to more than £100m. Mission accomplished!

That strategy hit its high point earlier this year with the acquisition of three UHY Hacker Young offices. That move propelled the firm into the £100m club and delivered the kind of growth Sovereign Capital needed to flip the business.

Just shy of its third anniversary, Affinia has a new owner in RedBird Capital Partners. The price tag is still under wraps, but industry insiders place the valuation in line with prevailing market multiples of approximately 14 -15X EBITDA.

Big US investor enters the sector

RedBird is a heavyweight new entrant to the accounting sector. The move comes hot on the heels of the RedBird-backed Paramount acquiring Warner Bros. Discovery, further expanding a portfolio that already spans media and entertainment, sports - including AC Milan - and financial services. But this marks RedBird’s first venture into the accountancy sector.

The move underlines the appeal of the UK accountancy market. RedDird is the latest American private equity firm to target the sector, following Lee Equity’s investment in Cooper Parry.

The UK accounting sector has long been in the sights of US investors, and with good reason. In an uncertain world, the profession is stable, well-regulated, and built on established businesses with consistent revenues. Clients rarely switch firms, and as they grow, so do the fees. This creates the kind of long-term, predictable income that a private equity firm like RedBird looks for. It’s certainly not a transactional relationship like you might have with a broadband provider.

Confidence restored

The deal also helps steady the nerves of spooked private equity investors after the £1bn sale of Xeinadin collapsed earlier this year. While the Xeinadin sale may have been beset by questions about the sprawling firm’s integration, its failure nonetheless still dented wider confidence in the market.

“This is positive news for all consolidators that are currently looking to flip,” said James Gosling, the managing director at AJ Chambers. “There are probably three or four consolidators, if not more, that are in conversations right now or towards the end of the year that are looking for a new private equity sponsor - and possibly a consolidator buying another consolidator.”

Affinia now benefits from RedBird’s extensive capital resources. Affinia’s Rob Harden recently told AccountingWEB that it had deliberately centred its acquisition strategy around Essex and the South East. That way, businesses joining could go through a repeatable integration process with the support of the other nearby offices. The acquisition of three UHY Hacker Young offices extended Affinia’s reach to Nottingham and has opened up its acquisition strategy in this next chapter to become more national.

The potential of artificial intelligence

RedBird also brings another significant strategic asset to Affinia: RedBird X, its proprietary artificial intelligence (AI) platform. In announcing the deal, RedBird’s Mike Zabik pointed to the “definitive pathway for Affinia to set a new industry standard for innovation and execution through the deployment of AI and other initiatives across the company”.

Ask any firm leader what their biggest priorities are at the moment and you can expect to hear AI mentioned alongside the perennial issues of talent and growth.

The same goes for Affinia, which even inserted AI into the firm’s name (it’s a portmanteau of ‘affinity’, ‘finance’ and ‘AI’, for those curious).

Beyond operational and efficiency gains, AI has clear applications in the M&A process for an acquisitive firm like Affinia. It’s not just useful for evaluating opportunities by analysing data sets, but it also plays a role after the deal is done. As Gosling noted, post-integration success is likely to depend heavily on AI and other technology.

And as firms scale, delivery models could change too. The ratio of clients per accountant could rise, enabling a firm to scale without hiring more people. “The accountant becomes someone who oversees models rather than directly does the work,” was how someone put it to me recently.

AI may not currently increase the valuation multiple directly, but it does make the firm more attractive. “If a firm is more tech-enabled and is using AI in the right way, and not just having technology for technology’s sake, the higher its profit margin is likely to be. The base multiple will likely be the same as another firm, but the higher profitability will mean a higher valuation,” said Gosling.

AI makes accounting a data business

The opportunities of AI may reach beyond efficiency gains. When AI is deployed effectively, a large accounting firm stops being just a professional services business and starts looking like a data business. For investors, that shift is an opportunity.

Firms have so much data on their clients. As someone in the profession told me recently, “Think about what you know about one client and now imagine if you have 100,000 clients; you’re able to look at trends and compare them to other types of clients.”

That’s where data becomes valuable, helping firms know which services to offer and how to meet clients’ needs as they evolve. There’s an angle here for accounting firms to push hard on data, and that’s now only possible with AI.

It’s too early to say exactly how Affinia will deploy RedBird X. But RedBird’s existing portfolio offers a preview. At AC Milan, the technology has been used to tailor fan engagement to real-time demands. At Bishop Street Underwriters, it was used to build a ‘digital twin’ of the entire insurance business and drive operational efficiencies across the firm.

It’s no wonder then that speculation has spread about a big tech platform interested in investing in a large firm in America. That remains a rumour at the moment, but from a data perspective, it makes perfect sense. But that’s a topic for another Decision Line newsletter.

Success of Sovereign Capital

The real story here is the lesson for other private equity firms looking to flip. The deal with RedBird underscores the success of Sovereign Capital’s strategy.

Alex Hay, partner at Sovereign Capital Partners, said in a statement: “It has been a pleasure to work with the team at Affinia over the last three years to create an emerging leader in the UK accounting services market. Our success to date is a powerful demonstration of Sovereign’s Buy & Build strategy in action.”

After taking a calculated risk on LB Group (which would become Affinia), Sovereign Capital invested heavily. It has successfully integrated 15 firms to date, including three UHY Hacker Younger offices. But where the investment has made a difference is in its people strategy.

In his recent conversation with AccountingWEB, Affinia’s CEO Darren Redmayne consistently emphasised the firm’s vision of being a “purpose-led, purpose-built accounting firm” with a focus on clients, colleagues and the community. Affinia’s success shows that a strategy only works if your people and clients are genuinely bought into the shared vision behind it.

“This shows that if you get the right private equity partner that shares a vision with the right leadership team, amazing things can happen,” said Gosling. “Affinia is one of those success stories where it has integrated all of its offices quickly, and it’s focused on its client base and people, and they got everyone pulling in the right direction.”

This week’s Decision Line is brought to you by the Accounting Excellence Awards.

Entries are now open for the Accounting Excellence Awards. This is your chance to showcase the work, progress and results that set your firm apart. Enter the awards and put your achievements in front of the industry.

The Accounting Excellence Awards include categories for client service, firm of the year, employer of the year, service line awards and deal of the year. Start your entry today!

Have a great week,

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Share

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Welcome back to Decision Line. Judging by the deluge of out-of-office replies in my inbox this week, I suspect much of the UK might still be deep into the Easter school holidays.

So naturally, what better way to interrupt your downtime than with the latest exclusive Decision Line article on the perils of always-on leadership? Yes, the irony is certainly not lost on me. But first…

Editor’s picks of the week

Before we dive into this week’s exclusive insider analysis, let’s explore some of the must-read articles we published on AccountingWEB for decision makers.

• How Affinia built a £100m firm in three years Affinia’s executive team tells AccountingWEB about its ‘purpose-led’ strategy and the integration behind its rapid ascent.

• The brilliantly terrifying advance of AI The potential of AI is terrifying – but in a good way. That’s the response of mid-tier accounting firms.

• What I heard at FAB: Accounting’s next moves I open my Finance, Accounting & Bookkeeping Show notebook to reveal what my on-the-ground observations say about accounting’s biggest trends.

Quote of the week

“Local firms being taken over by PE is *brilliant* for my business, as we pick up all the disgruntled clients. Had one last month whose fees have gone up 300% in 12 months and just said ‘NO’.”

One AccountingWEB reader provided an inside view on the impact of private equity consolidation in their region.

I recently spoke to a PE-backed firm that insisted this wasn’t the case for them. But as reported in the last Decision Line newsletter, an accounting firm leader told me at FAB that a PE-backed consolidator in their area wouldn’t touch any clients under £100,000. I’d be interested to hear both sides of this. Get in touch!

Now here’s the bit when you realise you’ve spent too much time thinking about work today…

Why ‘always-on’ leadership is a risk for accountancy

Ironically, this week’s Decision Line is about the struggle to stop making decisions. For senior leaders, switching off is easier said than done.

A few weeks ago, I spoke with a partner at a London firm who had recently escaped the gloomy British winter for a short break in the Canary Islands. Although he physically left the office, he mentally remained at his desk. He began every morning tethered to his inbox.

Of course, emails are more bearable when soaking up the breezy Tenerife sunshine sitting beside a pool. However, he reasoned that the shelves can still be stacked if a Tesco worker takes a holiday, but the same is not true for his audit clients.

The always-on mindset

Our conversation was timely because it coincided with M&S chief executive Stuart Machin telling the Business Leader Summit that he wasn’t a fan of the work-life balance language. He argued instead that senior leaders should stay connected to the business. The retail tsar shared an example of his ‘always-on’ leadership style, confessing that he was spending a weekend away for a friend’s birthday, but he would remain in touch with work.

You won’t find any pearl-clutching here. Senior leaders in accountancy firms are classic type-A personalities; they wouldn’t have scaled the ivory tower without pulling some ‘late nights’ or ‘leaning in’. The arduous compliance cycle is hardwired into leaders’ psyches, shaped from their earliest days as trainees when presenteeism was the norm.

Rakesh Shaunak, the CEO of MHA, told us that he doesn’t believe in the concept of switching off. “I have always described work-life balance as a mindset where you do not have to consciously think about one or the other, both states working in total harmony.” But Shaunak recognised that a change of scenery can produce “a welcome rejuvenation”.

Even still, a successful leader is often someone who genuinely loves their job, where the boundary between work and life is often blurred. The business becomes an extension of their home life.

But there is a tipping point. Over the years, I’ve heard countless stories of leaders in accountancy getting perilously close to burnout, especially from founders scaling their own firm. One story that stands out is a firm owner who told me that he was still responding to emails as his head hit the pillow.

Unsustainable always-on leadership

But some leaders are pushing back. Health obviously plays a part in this, but a pushback is needed for the sake of the firm’s long-term resilience. When the firm becomes too reliant on just one person, it spells problems.

At FAB I spoke to leaders who embraced the opportunity to dip into talks on the industry or catch up with vendors because rarely do they get the chance to step away from the firm, since the demands are all-encompassing. That means they spend too much time working ‘in’ the business, and not enough time working ‘on’ the business.

Liza Robbins, CEO of international accountancy network Kreston Global told Decision Line: “To be effective leaders, we must also be replaceable. If we are not, we are not running sustainable businesses. If a business depends on someone working around the clock, and that person was suddenly ‘hit by a bus’, then the business effectively goes under the bus as well.”

Naturally, personal networks are connected to your job, which makes truly stepping away more difficult. “Some of my closest friends and confidantes work in the profession, and we all deal with multiple audit and accounting firms, so it’s very easy for us to compare notes - but in terms of switching off, it was unhelpful to be discussing audit findings over last night’s supper!” said Robbins.

Shaunak echoed the need for delegation. “I have always believed in having the right team around me, good people suited to their roles and thereby producing the right outcome. That takes away the risk of micromanagement and automatically introduces the appropriate safeguards.”

Practice what you preach

While long working hours as a leader are unavoidable, the war for talent is also forcing a shift. To attract new talent, firms have adopted flexible working and leaned into ‘feelgood’ policies. Consequently, leaders are then forced to practice what they preach.

Joanne Kingsnorth (pictured above), joint managing director at Seymour Taylor, told us that they are always actively looking at ways to position the industry as an attractive and aspirational career choice.

Based in High Wycombe, the firm risks losing employees to London-based firms. To bring on the next generation of leaders, firms have to foster a people-first culture where the right to switch off becomes a differentiating factor.

“Sending emails in the evening and weekends doesn’t sell the dream of this job being the pinnacle you should reach. Why would they want to do that if it’s a 24/7 job and they see us looking exhausted?”

Seymour Taylor has gone a step further by actually shutting down their systems over the weekend, with staff explicitly told they are not allowed to access them. The firm even monitors compliance to make sure this rule is followed so that the team has the time off they deserve.

Of course, the firm sometimes softens this stance during deadline periods, but simply having a rule in place shows how seriously they’re taking this.

The pandemic changed a lot about our relationship with work. While firms have returned to the office, the environment is not what it used to be and according to those I spoke to for this piece, long gone are the days of people staying late or coming in early.

Kingsnorth may still work long hours in the week, but she keeps the weekend work-free and has found ways to digitally detox. Her work apps were removed from her phone after a big IT migration a month ago, and she’s decided not to reinstall them. “It took me about a couple of weeks to get used to them not being there, but actually, I now feel much more cleansed in the morning, and it is important to have that healthy break away from work.”

The productivity trap

It was a similar story for Emma Green, a director at Wellden Turnbull - a 60-plus-person, six-director firm based in Surrey.

She’s always been strict with her work-life boundaries, conscious of the example it sets for the rest of the business. “When I joined here as a senior under old leadership, I had a manager who would read her children bedtime stories over the phone whilst finishing off an audit file.” It wasn’t a motivating factor for career progression.

Times have changed. Of course, long hours remain part of life at any firm. How can it not when deadline pressures are constant? Green accepts that you have to work late hours now and then, but she also has a toddler who is growing up fast. She’s also aware of the foibles of accountancy’s long history with presenteeism.

“If you’re working late hours, you might do four hours of work, but in terms of actual productive time… It’s probably only an hour because you’re so knackered that it’s taking you three times as long to actually do it.”

Can accountancy really escape long hours?

Accounting leaders have got a lot better at switching off. As one leader put it bluntly to me: “No one’s going to die if you don’t reply to an email until the next morning.”

Ironically, the talent crisis isn’t causing late nights for some leaders. They have realised that to attract top talent, they have to set an example.

Meanwhile, the rise of artificial intelligence promises a productivity boom and a solution to relieving day-to-day pressure, with drafting and editing emails being one of the most frequently cited use cases.

But there is some weight to the M&S chief’s work-life balance harangue. Leaders may say they’ve changed, but the pressures of running a business remain. They’re still leading a firm with millions of pounds at stake.

The proliferation of private equity into the profession also comes with the demands of a high return on investment, and with that comes pressure on the leaders to deliver what they’ve promised.

For some, the always-on leadership is outdated and unsustainable. But as leaders of fast-growing firms, the rhetoric of switching off can still be aspirational, but unrealistic.

In accountancy, you can’t escape long hours, but you can ensure the business is strong enough to survive when you’re off.

A message from Accounting Excellence

This week’s Decision Line is brought to you by the Accounting Excellence Awards.

For over 20 years, the Accounting Excellence Awards 2026 have recognised excellence across the UK accounting profession, celebrating firms, teams and individuals delivering strong performance, innovation and client impact.

As leaders in accountancy, this is your chance to show the profession why you stand out! Enter here

Have a great week,

Richard

Got a question, comment, complaint, or a news scoop? Email me at Richard.hattersley@accountingweb.co.uk.

Spread the word and subscribe

Thank you for reading Decision Line brought to you by AccountingWEB.

Decision Line cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Subscribe now

Every newsletter, AccountingWEB’s managing editor Richard Hattersley offers exclusive insight and sharp analysis. Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Birmingham became the centre of the accounting universe last week. Thousands of accounting decision-makers flocked to the Midlands for the Finance, Accounting & Bookkeeping Show (FAB).

As it was AccountingWEB’s flagship event, I naturally had various roles over the two days, but that didn’t stop me from carrying around my trusted notebook. It’s a journalist’s instinct: every off-the-cuff comment, casual encounter or overheard snippet from a session I walked past provided a small but telling glimpse into the current state of the profession.

Thumbing through my notes on the train home offered an impressionistic review of the two days in Birmingham and, more tellingly, the issues that are keeping decision-makers awake at night.

Compliance took centre stage

To nobody’s surprise, Making Tax Digital (MTD) took up most of the oxygen in the room. But was anyone ever in any doubt about that? In just a couple of weeks, HMRC will finally sprint towards the MTD finishing line and open the gates for taxpayers above the £50,000 threshold after a decade-long, faltering campaign that spent much of its time limping and stumbling before gathering pace for a more confident final lap.

HMRC’s Jim Rogers broke the news at the start of day one that only 81,000 taxpayers have signed up for Making Tax Digital. Those I spoke with at HMRC were largely unfazed by the low number. They pointed out that the uptake mirrors where MTD for VAT stood at a similar stage and stressed that the first submission isn’t due until 7 August. They were right to feel confident. Days after FAB, HMRC revealed that the number of sign-ups had jumped to 100,000.

Unsurprisingly, any session involving HMRC or focused on MTD resembled a Paul McCartney performance on Glastonbury’s Pyramid Stage. But MTD still felt more like a 2027 problem, with many delegates seeing clients pulled into the regime when the threshold reduces to £30,000.

Trends beyond MTD

The decision-makers I spoke to were mostly unbothered by HMRC’s over-percolated digital project. Their attention strayed elsewhere. As leaders navigated the showfloor, it wasn’t so much bags of swag they came away with, but a sense of direction for what’s to come this year.

The content sessions provided clues to the big trends shaping the year ahead in accounting (and we’ll get to those in the coming days, weeks and months on AccountingWEB), but as is often the case, the conversations around the periphery of the Circle Stage became just as illuminating about the future challenges that are spread across accounting decision-makers’ desks.

Judging by the delegates and software vendors I talked to, the accounting profession is dominated by the twin crises of mergers and acquisitions (M&A) and artificial intelligence (AI). Depending on who you asked in the NEC last week, the crises either raged through the profession like the bull outside Birmingham’s Bullring or gleamed with promise like a ring in a Jewellery Quarter shop window.

M&A trends

Let’s start with M&A. The show had several sessions on M&A and succession planning, covering topics ranging from employee ownership trusts to private equity (PE) or trade sale. A senior leader at the event I caught up with after they’d attended the “Private equity vs independent growth” session on day two laid bare the M&A challenges for their firm.

In a region active with PE-backed deals, they could see the tension and impact on clients. A prospect contacted their firm after another PE-backed firm said it wouldn’t touch any clients under £100,000. This obviously creates the potential for a downstream of clients. But those I spoke to are still not seeing this trend flow through just yet.

M&A also became a hot topic during the Boardroom Debates on day one. In the “Where growth is coming from” roundtable, conversation naturally gravitated towards M&A. The accounting leaders around the table said that the standard valuation of a firm, without ratcheting up the value creation, is around 1.7x. But when a value-added service like wealth management is bolted on, the multiples could scale to at least 3x.

Credo’s Matt Norwood-Young (pictured above left) returned to this point in a closing wealth management session on day two, arguing that advisory services like wealth advice carry greater value in the current climate.

“We’ve got tailwinds in our industry that accounting practices tend not to have: assets under management tend to go up over time; equities grow, fixed income generates a yield which tends to get reinvested, and people’s attitude towards savings increases as they get older,” he said. “If you can capture those inside of your accounting practice, that should uplift the valuation of the total practice over time.”

My ears naturally pricked up. You can always tell something is a trend when it’s discussed in sessions that aren’t about it. At FAB, M&A was exactly that kind of trend.

It came up again in the “Making tech decisions with confidence” Boardroom Debate. This was hardly surprising given how tech integration has become a hot topic in the profession after Xeinadin’s £1bn sale collapsed last month.

I continued this discussion beside the Circle Stage’s white picket fence, where whispers painted Xeinadin’s tech integration as a “bag of nuts” and suggested that the current corporate leadership team is still paying the price for the firm’s 2019 big bang formation, when 115 small and mid-sized practices were stitched together. The gossip on the FAB yellow carpet was that the firm is much more mature and systemised, but the horse had bolted by the time the current leadership team took the reins.

Judging by the conversations I had at FAB, the M&A activity hasn’t slowed down yet. The profession still has at least another 18 months under the M&A spotlight. That’s the message I heard loud and clear.

Artificial intelligence

I didn’t need whispery conclaves to track the other big trend – AI and automation. Standing tall on the showfloor was the AccountingWEB AI Labs with Sage stage, which became a hub of conversations and hands-on demos. The AI noise was naturally dialled up in this area, but the conversation wasn’t contained there.

You didn’t have to walk far on the showfloor before you’d overhear an exhibitor talking a delegate through their latest AI proposition. Many even used the event to launch their new AI product. Apron, bots for that, Combinely, Dext, EazyCapture, Intuit QuickBooks, Record OS, Sage, Thomson Reuters and Xero are just some of the vendors I jotted down as having an AI proposition.

A vendor asked me whether the big theme at FAB was MTD or AI. From what I heard, the two were often mentioned in the same breath. MTD is increasingly being framed not just as a compliance burden, but as a broader workflow challenge. And AI is being positioned as the tool that could assist with that.

While the AI buzz reverberated around the NEC, the real challenge for firms wasn’t the technology itself, but managing the change within their teams. Another Boardroom Debate roundtable that focused on automation revealed a reluctance among long-established staff members to adopt new technologies. There was a willingness from the leaders, but the task was bringing staff and clients along for the ride.

The leaders around the table clearly recognised the benefits and how automation and AI could support high-value advisory. As one leader shared: “Our focus shouldn’t be on using tech to increase the client base, but to increase the client value.”

Across the showfloor, several sessions shared examples of where AI could take hold in the profession. Audit stood out as an obvious candidate for AI disruption, a point underlined in the “Audit reimagined” session on day one.

The AI conversation has come a long way since FAB in 2025. At a roundtable last year, senior leaders noted that while firms were taking proactive steps to integrate AI into their workflows, many still lacked dedicated AI strategy and policies and were encountering resistance from employees.

This year, the technology use cases are clearer, the practical advancements are demoed on the showfloor, and the disruption in certain sectors is already taking hold. However, reluctance or time pressures remain.

I spoke to a senior leader who didn’t have the headspace to understand where to start or where to invest. The compliance treadmill shows no signs of slowing down – just look at the standing-room-only crowds at the Circle Stage for the MTD and anti-money laundering (AML) sessions. Leaders with client portfolios are finding it increasingly hard to work on the business when a lot of their time is spent working in the business. So AI decisions are deferred or delegated.

This inertia, or partner-level decision bottleneck, creates opportunities for others. I caught up with a bookkeeping firm owner who had secured a lucrative AI contract from a large accounting firm precisely because they were more agile and quick to adopt and experiment with tools like Copilot. They argued that many accounting firms are hampered by a partner-level decision logjam.

What will be the talk of FAB 2027?

As I close my notebook for another year, I’m left wondering where we’re going to be when FAB returns to the NEC in March 2027.

It’s rare as a journalist to stand in a room of thousands of accountants and to capture a real-time snapshot of the profession’s mood. From my scrawlings, the compliance demands of MTD and AML continue to create internal workflow pressures but also opportunities to grow; however, it’s the external forces of AI and M&A that are dominating leaders’ concerns. FAB offered these leaders a moment to step back from the day-to-day, but the real test now is how they effectively put those insights into practice.

In 12 months, the MTD threshold will fall to £30,000, and that will undoubtedly be the talk of FAB 2027. But with disruption accelerating through the profession, nothing else is guaranteed.

Thank you for reading AccountingWEB’s Decision Line

Decision Line from AccountingWEB cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Every fortnight, Richard Hattersley offers exclusive insight and sharp analysis.

Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Share

AccountingWEB’s Decision Line is brought to you by the Finance, Accounting & Bookkeeping Show (FAB) on 11 - 12 March at the NEC in Birmingham.

Today’s Substack delves into the world of artificial intelligence. This article forms part of our Special Editorial Report, in association with Sage, State of the nation: AI in accountancy and bookkeeping.

Artificial intelligence is set to be a hot topic at FAB next week. A new innovative feature at the show will be AccountingWEB AI Labs in collaboration with Sage.

Designed as a hands-on dedicated growth hub, the AI Labs give you the space, confidence and practical tools to turn AI into real progress for your firm, team or organisation. Discover practical advice to use AI in your firm at FAB.

Secure your free ticket

“AI is terrifying… but terrifyingly brilliant.” That was the verdict of an IT professional working in a mid-to-large accounting firm at the end of a panel I participated in at the Accountants in IT’s (AIT) InnovAIT conference last year.

That comment has stayed with me because it captures how mid-tier accounting firms are responding to the gravitational pull of artificial intelligence.

Firms recognise they need to adopt the technology, but there is a real tension over where to begin, how fast to move, and how far ahead their competitors really are. Above all, the sheer power and potential of AI is so overwhelming that many firms are still only scratching the surface of what’s possible.

It’s hard to look back at the past 12 months and not be struck slack-jawed at the speed of adoption across the profession, particularly among mid-tier and large firms. Our 2025 Accounting Excellence Awards research illustrates this shift. More than two-thirds (68%) of large firm entries mentioned using AI, while 64% of mid-tier firms were close behind.

Usage still leans heavily towards drafting and editing emails, letters and advice, but firms are increasingly turning to the technology for research, technical queries and audit analytics.

Despite ongoing concerns about transparency and maintaining service standards, mid and large firms are progressing beyond experimentation and low-level, time-consuming tasks, even if some unease persists within these organisations.

For example, AccountingWEB’s AI research with Sage found that large firms are the most assertive in their adoption, with 80% identifying as either strategic adopters or trailblazers. Mid-tier firms were just behind, with 50% falling into the strategic adopter category and 11% as trailblazers. They are noticeably ahead of smaller firms, especially micro firms, where the trailblazer persona is almost non-existent.

Thank you for reading AccountingWEB’s Decision Line! Subscribe for free to receive EXCLUSIVE articles sent directly to your inbox.

Subscribe now

Obsessed with AI

It’s one thing to see the data; it’s another to hear it directly from firms. At the AIT conference, where I spoke on the ‘Balancing Innovation & Risk’ panel alongside Esther Mallowah, ICAEW’s Head of Tech Policy, and Kyle Wilkinson, Workday’s strategic industry advisor, there was no doubt what the room really wanted to talk about.

I don’t think I’ll break any Chatham House rules when I say that throughout the day, artificial intelligence dominated conversations with CTOs and IT professionals and the content agenda. You couldn’t walk 10 paces without overhearing delegates swapping AI stories.

The sentiment that “AI is terrifying... but terrifyingly brilliant” was frequently expressed in those discussions, although the exact wording varied. Over coffee, one IT professional talked me through his firm’s AI concerns (mainly around clients trying to drive down fees), but then promptly pulled out his smartphone and showed me the latest AI tools he was experimenting with.

The same conversations I had over coffee and danishes are probably happening in hushed tones across mid-tier and large firm boardrooms in the UK.

Mixed picture

Ian Pay, ICAEW’s Head of Data Analytics and Tech, who hosted a couple of roundtables at the AIT conference, described the take-up of AI amongst mid-tier accounting firms as a “mixed picture”.

You’d expect progressive firms at the AIT conference and the Accounting Excellence Awards to describe their experiences with AI, but not every firm has these tangible use cases.

According to Pay, the vast majority of mid-tier firms are playing a wait-and-see game. Speaking to AccountingWEB months after the AIT conference, Pay recalled one attendee saying: “We’re quite happy being second.”

“When it comes to the adoption of relatively new technologies, most firms wait and see how it lands with other firms before they decide what to invest in.”

The wait-and-see game

The same wait-and-see theme came up in a roundtable I ran with mid-tier and large firms at last year’s Finance, Accounting & Bookkeeping Show (FAB).

These firms recognised they needed to do something, but some hadn’t nailed their strategy or found themselves outpaced by the technology. One attendee crafted their firm’s tech strategy in 2023, and at no point did it mention AI.

“AI needs its own strategy, in the same way you plan your headcount or market expansion,” said the roundtable attendee, who admitted that they had to rip up their strategy and start all over again.

These false starts might make mid-tier firms assume they’re falling behind, but for many, their expectation of where other firms are compared to theirs differs from reality.

“The challenge with AI is it’s moving so quickly that if you wait too long, then you end up falling behind,” said Pay. “But I think a lot of firms think they’re behind, when actually the reality is that pretty much all the firms are in that same space.”

Fear of getting it wrong

Much of this hesitation comes from how firms think about software decisions in general. According to Pay, any nervousness about committing to a particular path comes from the mindset that a software decision is a milestone event that you have to get right – otherwise you’re stuck with it.

“Whether it’s simply choosing ChatGPT, Google Gemini or Microsoft CoPilot, people are overwhelmed by choice. They worry about whether it will work out for them, or what if it doesn’t develop like the others,” he said.

His advice to firms paralysed by choice is simple: just go for it. “It’s not a big, multi-year investment anymore. If it’s not working out the way you want it to, and you’re looking over the fence and seeing another tool that looks like a better fit, then that’s okay. But it does require a cultural change in an organisation to be comfortable with that agility,” he said.

That cultural shift is where some firms struggle. Because the technology is so new and transformative, senior leaders are unsure where to begin. All they know is that when they look over the garden fence, their competitors are doing something, so they feel they must, too.

Get a policy in place

Another common concern is the use of large language models (LLM) tools like Copilot, Gemini and ChatGPT in the workplace. At the mid-tier and large firm roundtable at FAB 2025, attendees discussed the need for AI training and shared stories of other firms issuing blanket bans on certain AI models, which inadvertently led to shadow use in these organisations.

“Some firms ban LLP-style models entirely. I don’t think it’s progressive, but I understand; it’s a risk management strategy,” said one roundtable contributor.

For many, there is an acceptance that employees will use this technology, so they should create an internal policy. Although I’ve heard noises (not so much recently, admittedly) from some who would rather err on the side of caution and have installed a blanket ban on the use of AI. Again, firms haven’t found a consensus here.

According to AccountingWEB’s AI research with Sage though, medium and large firms appear to be more open to using external AI tools than their smaller counterparts. The research found that 81% of medium firms and 89.5% of large firms use these tools, while micro firms in particular appear to be more resistant.

The firms making the most progress with their AI plans are those that are taking a people-first approach. Last year, I spoke with Amy Wilson from mid-tier firm Harold Sharp, who has successfully got their people on board with AI. She said their strategy is simple but effective: “We ensure everyone has a voice.”

“We have done this gradually with time, resources and expertise, and we’ve got our people on board. We didn’t enforce a sudden and massive change of strategy – that only makes people nervous. They’ve come along with us as part of a longer journey,” she said.

Pay advises mid-tier firms to at least have a policy and make their people feel supported in using tools correctly, rather than turning a blind eye to shadow use.

“Staff will be using this technology whether you allow it or not,” he said. “If you start from the point of view that they are going to use this technology, then you need to put in place policies that ensure they’re using it in a way the firm is comfortable with, rather than just saying, ‘We don’t want you to use this technology.’

“The horse has already bolted. You can’t say you’re not allowed to use these tools. People will just use it on their personal phones.”

That’s not to say firms aren’t cautious for other reasons. According to AccountingWEB’s AI research with Sage, data security remains a major concern, cited by 62% of medium-sized firms and 57% of large firms. However, this is a problem that cuts across firms of all sizes. The skills shortage is another significant barrier, with 47% of medium firms and 48% of large firms saying they struggle to find the right people to implement and run the technology.

Larger firms, however, are already taking a more sophisticated approach. One entrant to the 2025 Accounting Excellence Awards, for example, explained that it had created a dedicated role specifically to oversee the security of its AI systems.

Client expectations and the fee question

One of the most persistent fears around AI is how clients will react. For some decision-makers at least, this might be the “terrifying” part of using AI.

As already mentioned, some partners are already voicing their concerns about how their AI strategies are communicated to clients: if tasks are performed more quickly, clients will expect to pay less… surely?

“This is a classic pushback trope,” said Pay. “I’d encourage the conversation to be turned around instead to: we’ve had to invest heavily in technology, and using new technology is allowing us to be more productive and deliver better service.”

He advised firms to reframe the conversation with clients and inform them that using the technology actually allows the firm to minimise any fee increases. For those reticent about the firm using AI, Pay suggested firms present the option without AI.

“The premium is on not using technology,” he said. “If they do not want to engage technologically, then that’s going to cost more. The message they should communicate is, ‘Using the technology allows us to maintain fees at a manageable level and absorb some of the cost increases relating to other external factors.’”

Private equity’s influence

The mid-tier and large firms are not navigating these AI issues in isolation. The technology shift coincides with the rise of private equity-backed consolidation in the profession.

ICAEW’s Mid-tier Evolution research, published in June last year, shows the significance of this. Private equity investment was cited as the biggest macro trend driving change in the profession, as voted for by 86% of respondents - up considerably from 57% in the prior year. The third biggest macro change was generative AI.

The tentacles of private equity investment are directly impacting the technology landscape, and in turn, that’s shaping mid-tier and large firms’ AI adoption.

“Private equity is driving a lot more investment in technology, but also by firms that are not PE-backed because they feel the pressure to make those investments and keep pace,” said Pay.

To stay competitive, independent firms are exploring AI as a potential battleground. An independent firm entering this year’s large firm category at the Accounting Excellence Awards said they had positioned their staff to be AI-ready and have undertaken AI-focused pilot schemes to be at the forefront of the new technology as a tactic to differentiate themselves from their PE-backed competitors.

Private equity investment in technology is usually driven by a desire to improve efficiency and streamline operations. But as Pay found in his conversations with mid-tier leaders and at the AIT conference, its rise has also created a real tension between pursuing forward-looking innovation and simply keeping the lights on.

“With all the PE investment that’s driving a lot of the mergers and acquisitions, the technology leaders in those firms are having to focus on bringing different organisations together effectively and integrating different systems.

“If you’re trying to do that for six firms in one go because your private-equity house decided to snap up a lot of smaller firms, that’s going to take up a lot of your time. As a result, you’re not going to have the same amount of time to look at big technology investments.” So AI explorations could be put on the back burner.

Another joint challenge is around pricing. Pay said that a couple of firms have said to him that as soon as a vendor gets wind that you’re PE-backed, “dollar signs start to roll in their eyes”. With AI embedded in products, the costs to keep up with AI advancements come at a price.

Independent firms find themselves stuck in the middle of this. Those adamant that they’re not going down the PE route will instead come up against rising IT costs. But if they are to compete in this AI-obsessed world, they have no choice.

But the motives of private equity investment in technology are often to improve efficiency and help streamline operations. So overall, private equity is actually pushing firms in the right direction to use technology and to operate in a more streamlined way, which is a positive, and AI plays a part in that.

Terrifying but brilliantly terrifying

“Terrifying but brilliantly terrifying…”That one delegate really summed up the current AI landscape for mid-tier and large firms perfectly. Just how AI can completely reshape the profession is terrifying. The potential of the technology is still untapped. As the Accounting Excellence and Sage research shows, firms are increasingly using it beyond drafting emails.

But whether partners are for or against the tech, whether they have a policy in place or not, and whether disgruntled clients are already banging on the office door demanding a fee reduction, you really can’t escape the fact that the technology is “brilliantly terrifying”.

This article is an extract from our latest editorial special report, State of the nation: AI in accountancy and bookkeeping, in association with Sage. Download the report now to access all the insights and findings and get your practice AI-ready.

We will be hosting an AI Labs feature in association with Sage at the Finance, Accounting & Bookkeeping Show (FAB) at the NEC, Birmingham on 11–12 March 2026. Book your free ticket now to access talks, workshops and insights, as well as get to see all the latest AI tech on display.

Thank you for reading AccountingWEB’s Decision Line

Decision Line from AccountingWEB cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Every fortnight, Richard Hattersley offers exclusive insight and sharp analysis.

Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

AccountingWEB’s Decision Line is brought to you by the Finance, Accounting & Bookkeeping Show (FAB) on 11 - 12 March. Today’s Decision Line focuses again on M&A and the human fallout of private equity consolidation.

The M&A bonanza is set to be one of the hot topics at the two-day event at the NEC, Birmingham. If you’re interested in this topic, make your way to the circle stage on day two and see the Private Equity vs Independence growth session.

Don’t miss out, secure your FREE FAB ticket today.

Consolidation in the market has made plenty of noise as of late. Much of the coverage has focused on which firm is the latest to strike a deal, or how far a consolidator has climbed up the accountancy league table.

That’s understandable given the volume of capital flowing into the profession and the barrage of press releases clogging every accounting journalist’s inbox. What’s often missing is the potential human fallout.

While others may see the rise of private equity-backed consolidation as an existential threat, Shru Morris (pictured below), the CEO of Dow Schofield Watts, has grasped the disruption as an opportunity.

“Private equity is driving consolidation, and firms are getting bigger, but there are many people who want to be in control of their destiny,” she said. “We see that as a great opportunity to pick up that talent.”

The battle lines have been drawn. Those tempted to make a deal have either already done so or are thawing to the consolidators’ advances. On the other side of the fence, firms that have resisted have made a point to pin their independence to the mast. But beneath this sits the consequence of this M&A bonanza: the disruption of long-established career paths for senior professionals.

Judging by the Accounting Excellence Award entries alone, the talent crisis remains a perennial thorn in the profession’s side. As firms are acquired and folded into larger groups, consolidation risks shaking out experienced leaders who were previously content until ownership structures, incentives and autonomy began to shift.

Thank you for reading AccountingWEB’s Decision Line! Subscribe for free to receive EXCLUSIVE articles sent directly to your inbox.

Subscribe now

A different kind of model

Part of the reason why Morris sees the opportunity, where others run with their pitchforks, lies in the Dow Schofield Watts model itself. As much of the profession bends to private equity, Dow Schofield Watts remains an outlier. Along with MHA, they’re the most notable firms to pursue an initial public offering (IPO). When Dow Schofield Watts floated on the stock market in December 2021, it raised £5m, giving it a market capitalisation of around £21m.

The mid-market accountancy brand viewed its alternative investment market (AIM) listing as a way not only to scale the business but also to raise its profile and attract senior, entrepreneurial professionals.

“Obviously, we wanted to raise capital,” said Morris. “We could have done that with private equity, but we wanted to raise capital to support this growth to help individuals effectively start their own businesses,” said Morris.

“It feels like a big move for people coming from a large organisation like KPMG or Deloitte to set up on their own,” said Morris. “It may feel risky, but I think being part of an AIM-listed organisation mitigates some of those concerns. We are heavily regulated and have to run our business in a certain way. We can then give them the advantage of being in a large organisation, but they can still run a small firm.”

The ideal candidate is someone with a Big Four background who wants to take the plunge and start their own business. But the recent surge in consolidation hasn’t just changed the branding of the large firms that have been acquired – it has also changed the career trajectories for many senior leaders within them, too.

Private equity blues

It is still early days for many private-equity backed firms, with many yet to move beyond their post-acquisition honeymoon period. But Dow Schofield Watts is starting to have more conversations with individuals who are questioning where their role would sit in their current firm in five to 10 years’ time.

“They have even less say in the future direction of the business,” she said. “They often want to act for the types of clients they choose, but they now face more conflict because they’re part of a much larger organisation.

“They now have more restrictions on pricing and on the type of clients they can take on. They want to service the clients in the way they believe is best, rather than the client getting lost in this big conglomerate created by these larger consolidators.”

These conversations are becoming more frequent, but Morris believes the peak is still to come. “We expect to see more of these conversations over the next two years as the initial novelty wears off. We’re still only in the initial stages of private equity. For the first six months, nothing changes. Then, after the first year, that’s when their entrepreneurial spirit kicks in.”

Over the past 18 months, the pendulum has swung towards private-equity-backed consolidation. What Morris is now reporting may be the early signs of the pendulum swinging back, as new firms emerge under leaders who are constrained by what their former firm has become.

The rise of boutique firms

As a result, Morris expects to see more boutique firms start popping up. “The people leading these firms don’t lend themselves to the larger or the lower mid-market. They’ve asked themselves: are we best serving clients in a boutique firm or a large conglomerate?

“I might be wrong, but in some organisations, there is a pressure to push work down to more junior staff or to rely on technology or offshoring for the work. I’m not saying this is wrong, but if you’ve spent the past 30 years with clients – it’s an intense relationship – and it generally needs to be with a senior person.”

Dow Schofield Watts would say that, wouldn’t they? You might say. However, there’s no denying the strain of the talent crisis in recent years, and any upheaval in the market could dial up the pressure. This is especially true for anyone whose career path has been derailed as a result of their firm’s acquisition.

“There are people who possibly started their careers in a large accountancy firm, thinking they’ll make partner. But the partner route looks very different for them now,” said Morris.

“The equity partner route isn’t the same as it was 10 years ago, and that’s going to be more of a push factor.”

The future of private equity consolidation

Don’t mistake her words: she’s not against private equity consolidation. Morris was clear at the outset of our conversation that private equity investment has brought huge value to professional services. She even went as far as describing it as “overdue”.

“The value in consolidation comes from the operational leverage and the investment in technology, which ultimately drives better value-added services for clients,” she said.

Rising salaries and the costs of technology have made it harder for small firms to thrive independently, she said. In that context, scale and operational leverage can improve the quality of service and returns for stakeholders. “It works better in certain areas of professional services than others, where technology can drive efficiencies and unlock the most value,” she added.

Dow Schofield Watts doesn’t operate like a traditional compliance firm. It doesn’t get its hands dirty with high-volume repeat business, focusing instead on niche advisory and corporate finance deal advisory work. Technology plays a part, but it’s not in the same stratosphere as what you’d find in firms that primarily deal with tax compliance work.

Private equity tends to circle compliance-based firms with repeat clients, where they can put investment into the back office and infrastructure. Dow Schofield Watts naturally feels outside this orbit and is ready to capitalise on senior leaders looking for a new home. Since being in the CEO post for the past 18 months, Morris has seen an upward trend in those conversations. But how long will it last?

The topic that’s dominated AccountingWEB’s Decision Line Substack recently is whether private equity valuations have peaked. There are signs that M&A activity may have peaked last year, but Morris isn’t convinced. “I don’t think we’ve hit the peak,” she said.

“If you look at the legal sector, there is a long tail of smaller firms that still have continuing succession problems. And then, the rise of artificial intelligence and technology will leave some firms behind, so there’ll be a natural desire to join a larger platform and consolidate.”

The success of private equity in the sector is still to be tested over the long-term, but as Morris put it, technology can only get you so far. “The firms that survive long term don’t just have a large number of clients, but strong, sustainable relationships. And that comes down to people.”

Private equity has offered partners a compelling exit and the firm a credible growth story. The right deal can promise a bright future for the next generation, but not necessarily the one they imagined. Morris and Dow Schofield Watts are betting that senior leaders will want to unshackle themselves from their new corporate homes. If Morris’ early signals are correct, the next chapter of the M&A bonanza may be a surge in start-ups.

Many of the issues affecting mid-tier firms will be discussed at the Finance, Accounting & Bookkeeping Show in March 2026. Secure your FREE ticket today.

Thank you for reading AccountingWEB’s Decision Line

Decision Line from AccountingWEB cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms.

Every fortnight, Richard Hattersley offers exclusive insight and sharp analysis.

Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Share

Was the valuation too high? Was the technology integration too weak? Or is private equity’s appetite for professional services starting to cool?

The questions have been flying this week after the Financial Times reported that the sale of Xeinadin had fallen through, with the owners unable to secure their targeted £1bn-plus valuation.

The collapse comes just a week after AccountingWEB questioned in its Decision Line Substack whether valuations in the accountancy profession had peaked. The conclusion then was that they probably had. The Xeinadin news adds further weight to that argument.

Thank you for reading AccountingWEB’s Decision Line! Subscribe for free to receive EXCLUSIVE articles sent directly to your inbox.

Subscribe now

Exponent’s investment and rapid expansion

Private equity firm Exponent invested in Xeinadin in May 2022, a turning point for the accounting firm, which had been formed three years earlier from the merger of 115 small and medium-sized practices.

Since then, Xeinadin has grown at a striking pace, with the size of its acquisitions increasing too. Last year, it snapped up Raffingers, followed by top 100 firm Grunberg last month.

The firm now has more than 130 offices across the UK and Ireland, employs around 2,500 people, and serves over 80,000 small and medium-sized clients. Xeinadin recorded a revenue of £155.5m, with an EBITDA of £37.4m for the year ended 31 May 2024, while reports suggest revenue is now closer to £250m, with EBITDA around £60m.

Despite strong growth, the scale of Xeinadin’s roll-up has drawn criticism over whether its sprawling portfolio is fully integrated, leaving any potential buyer with a considerable consolidation task. To be clear: Xeinadin has rejected this characterisation.

There is also the counterargument: that private equity’s role is to create value while deliberately leaving some growth opportunities for the next owner to pursue. Even so, Xeinadin’s failure to achieve the top-end multiple of 15-16x EBITDA to reach a £1bn valuation does test the waters of the market’s appetite for similar deals.

Xeinadin told the Financial Times that the decision to pause the sale, despite “multiple expressions of interest”, was based on the “opportunity to deliver further value”. Nonetheless, the collapse raises broader questions for the profession and private equity: are valuations too high and is full integration a necessary step for exit?

PE firms overpaid on the way in

Adil Taha, a private equity operating partner who has sold both law and accountancy firms to PE, believes investor appetite remains strong, but warns that the exit prices are set too high. “Many investors overpaid on the way in,” he said.

“There’s a saying in private equity that you make all your money on the way in, which ultimately means don’t overpay for the asset. I think the majority of PE firms are getting it wrong.”

Taha added that many recently acquired law firms have been “mildly distressed,” and PE is now adjusting its approach. “There’s still a load of appetite, but the type of firm they’re targeting is slightly different to what it was two years ago.”

He noted that there’s been a real issue in scaling accountancy businesses. “It’s not as easy as people thought it would be in bringing different accountancy practices together.

“You could probably pay seven or eight times for an accountancy firm - maybe nine - but I’m seeing 10x-plus. At that multiple, you’d have to sell the firm at 12x or 13x times, which you’re unlikely to get with a professional services firm.”

According to Taha, the issue is partially because the initial enthusiasm was never as strong as claimed.

“The press made a really big deal about private equity coming into professional services, but if you look at the deals being done and compare them to private equity deals in other sectors, it’s nowhere near as crazy as what it’s been made out to be.”

AccountingWEB’s Decision Line Substack is brought to you by the Finance, Accounting & Bookkeeping Show (FAB).

The themes explored in this article — growth, leadership and M&A — will take centre stage across the two-day event at the NEC in Birmingham on 11–12 March. Secure your free ticket today.

Secure your FREE ticket

EBITDA pressures

There are also broader market pressures. Keith Underwood, managing director at M&A consultants Foulger Underwood, said PE houses planning to exit in four years face pressure to grow EBITDA significantly in that timeframe.

“If a buyer pays the kind of prices reported in the press for other deals - say 14x to 15x - when acquiring from another PE house or consolidator, they would have to complete a significant number of acquisitions to dilute that original entry price so they can ultimately exit again at 15x or 16x.”

The problem is that the pool of available acquisitions is shrinking. “There have already been a significant number of deals in the mid-tier, and while there are still firms out there who would consider selling, the number is still shallower than it was a few years ago.”

According to Underwood, Xeinadin is left with two main options if it wants to boost EBITDA over the next year to achieve its desired multiple: either fund additional acquisitions, which requires capital, but that’s no problem for a private equity house if the acquisitions are available, or rationalisation and reducing costs. “The most obvious lever is the number of offices,” said Underwood.

Fragmented footprint

What sets Xeinadin apart from some of the private-equity-backed firms is that it scaled by scooping up dozens of small practices, particularly in its early days. That approach has left it with more than 130 offices around the UK and Ireland. By contrast, Grant Thornton only has 23 offices in the UK.

This fragmented footprint poses further potential problems for Xeinadin. “Because they acquired so many small practices, a large proportion of their client base consists of smaller clients. That’s different from some of the other larger consolidators like Sumer, which have focused on acquiring £10m, £15m and £30m practices and as a result have larger clients,” said Underwood.

“Those larger clients would generate higher revenues through advisory work and have a greater appetite for it. In contrast, smaller clients often wouldn’t want additional advisory services. As a result, Xeinadin is likely sitting on a sizeable number of those clients simply by virtue of the volume of acquisitions it has made and the number of offices it has.”

The limits of integration

Acquiring a large number of small offices also magnifies integration challenges. Paul Layte, the co-founder and group director of acquisitive Ascendant, explained: “The technology isn’t built for the deep integration that [a firm the size of Xeinadin] would need,” he said.

“The tech is built for one accountancy practice. When you’re trying to bring a business together, even if you’re using the same technology, it’s never a smooth process.”

The challenges of merging two small practices are manageable, but the complexity increases when combining two multi-office firms with 100 staff apiece. As Layte put it: “The bigger it is, the less likely you are to integrate.”

Sumer, another private-equity-backed firm, has been just as acquisitive, but as Layte explained, while it brings together medium and large practices, it does not have any particular integration strategy. However, Sumer’s approach indicates that full integration might not always be necessary for a successful exit.

“You’re trying to change organisations that have existed for 20 or 30 years, with hundreds of people, and then make a firm in, say, the north east of England operate in exactly the same way as one in the south west. It’s difficult, and you have to ask whether the return on investment is really worth it,” said Layte.

That’s why, he said, a lot of consolidators don’t do deep-level integration. “They do a superficial integration.” The focus is instead on “integration 101,” added Layte, targeting areas around the edges such as finance, HR and the back office.

“Integrating practices - sharing resources, using the same technology stack, getting people to collaborate and aligning all the things that sit in the guts of a firm - is far harder to achieve in real life.”

Integration challenges now and beyond

When AccountingWEB spoke to Xeinadin’s CEO Derry Crowley last year, he emphasised Exponent’s role in driving integration and investing in IT systems. Crowley said that the investment resulted in Xeinadin being “fully integrated”.

He noted that everyone is on the same server in the cloud. “At the time of the Exponent investment, we only had around 10 to 12 people in the central office, now we have over 100 people providing services to the office,” said Crowley.

Despite this, criticism persists about Xeinadin’s integration. Left fragmented, the challenge of consolidating the brands would be passed to the next owner. “You can imagine the effort involved in bringing together 130-plus small firms, each shaped by different eras, into a single way of working with shared resources and a common technology stack,” said Layte.

“That requires extensive retraining, changes to client touchpoints, and significant operational disruption. I suspect many firms have run the numbers and concluded the workload is substantial and can’t see the ROI on all of that.”

More broadly, Taha agreed that technology investment is often neglected within private equity firms. “Very little goes back in terms of investment,” said Taha. “Some big law firms are held together by some basic technology, like Microsoft Excel.”

Artificial intelligence is emerging as the next integration challenge. For PE firms, the prospect of using AI to paper over the cracks across a sprawling portfolio to cut costs and create efficiency savings may add a twinkle to their eyes, but in practice, it introduces another layer of integration complexity.

“Technology and artificial intelligence are going to revolutionise these professional services overnight, but embedding new technology in these sectors will take a huge amount of time,” Taha said. “This is a people-led change. I know firms that are spending heavily on AI, yet staff simply aren’t using it.

“I’m not convinced technology will be transformative in the short term. Over the long run, yes, but in the next few years, I expect only a gradual increase in appetite for greater tech use.”

Looking ahead

Private equity appetite remains, but inflated entry valuations, integration complexities, and shallow mid-market supply make it difficult to grow EBITDA fast enough to justify exit multiples of 15–16x.

Xeinadin’s sale collapse could be seen as a cautionary tale for the sector, but it’s far from a bellwether for the rest of the private equity firms.

The FT reported that Saffrey has begun exploring options for external investment, while Kreston Reeves and Shaw Gibbs have each appointed advisers to assess potential sales. Sumer, meanwhile, is understood to be targeting a £1bn valuation, though, as Layte suggests, it also faces integration challenges.

The deal pipeline remains strong, but the convergence of pressures facing consolidators points to a more testing period over the next 18 months.

“Private equity houses that have committed to roll-ups still have the money on the table to do deals,” said Underwood. “If they’re available, they’re willing to increase those multiples up to nine times to take on high-growth potential practices which might come on to the market. That is not going to diminish.

“Private equity houses have to go through a four to five-year cycle to monetise their profits for their investors. Those who are in it already will continue.”

The question is whether we will see new private equity entrants to the marketplace. “Beyond the odd one or two, that feels unlikely,” said Underwood. “The mid-market is just too shallow to support it. There isn’t enough depth to take a, say, £30m investment and scale it to £200m within four years.”

It isn’t the end of the PE boom, but it appears that the upside has largely been reached.

“It’s hard to see private equity houses getting more than 15–16 times EBITDA,” said Underwood. “Deals will still be done. PE firms already committed will work through their investment cycles. We’ll likely see consolidators acquiring other consolidators in the next 18 months.

“After that, we’ll have to take a rain check and reassess where the market stands, particularly given the lack of mid-tier accounting practices coming to the market.”

Many of the issues affecting mid-tier firms will be discussed at the Finance, Accounting & Bookkeeping Show in March 2026. Secure your FREE ticket today.

***

Thank you for subscribing to AccountingWEB’s Decision Line

Decision Line from AccountingWEB cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms. Every fortnight, Richard Hattersley offers exclusive insight and sharp analysis.

Please subscribe and share this edition of Decision Line so we can grow the message further and wider.

Share

“We were looking to sell in three to five years, but was the opportunity still going to be there? We decided that this is probably the peak of the market. If anything, it’s going to slow down…”

That was the view of a managing partner at a mid-tier firm I spoke to recently. They asked to remain anonymous because the deal is not yet public, but the sentiment remains. In the end, they rolled the dice, concluded valuations were unlikely to beat last year’s highs, and took the offer. They are far from alone in mulling over this decision.

Most managing partners have had that call from a private equity house. The ones I’ve spoken to certainly have — in some cases, it’s a weekly occurrence. And there are only so many times you can bat away an approach before you start to wonder whether this really is the peak.

So will those that took the plunge regret their decision as valuations continue to rise, or are things going to slow down from here?

Thank you for reading AccountingWEB’s Decision Line! Subscribe for free to receive EXCLUSIVE articles sent directly to your inbox.

Subscribe now

How long will peak valuations last?

If you listen to James Gosling, the managing director at AJ Chambers, there is no time like the present to shake hands on a deal. “Valuations definitely peaked last year,” said Gosling, who noted that 2025 had the most transactions in the accountancy space for some years.

“It had been building, but last year was really the point where many of the dynamics driving the M&A activity were really emphasised,” he said.

To say practices have had their hands full would be putting it mildly. The pressures behind the decision to sell range from the lack of a succession plan and difficulties attracting and retaining talent to regulatory burdens and the growing challenge of keeping pace with technology – a problem that has only intensified for some with the sudden rise of artificial intelligence.

These challenges are as common in an accountancy office as Teams calls, naff self-help leadership books or bitter coffee. The only difference this time is the tidal wave of private equity investment sloshing onto accountancy’s shores. The first big player in the accountancy space, really, was Cogital-backed Baldwins (now known as Azets) almost a decade ago. Since then, the likes of Xeinadin, Sumer, Cooper Parry, Gravita and even Grant Thornton have deepened their pockets with PE-investment.

Gosling also attributed last year’s heightened activity to a sense of herd mentality. “A lot of people, maybe on the fence about whether they should sell or not, were seeing their competitors or people around them being bought or merging with another independent firm,” said Gosling. “The momentum had been building, and last year we saw people say, now’s the time to move.”

The question is how long that peak will sustain. Another managing partner I spoke to this week said the peak could last anywhere from one year to five years. Regardless, after a busy 2025, the momentum is expected to continue this year anyway.

“It’s going to be relatively high because there are a lot of ongoing conversations that have dragged from 2025 into 2026,” said Gosling.

The MTD elephant in the room

Private equity-backed investment may have attracted the most headlines as the shiny new toy in the market, with huge names merging and new players surging up the accounting league table, but a lot of movement this year is expected in the independent space – especially with firms under the £1m mark.

Much of that can be attributed to the starting pistol firing on the government’s long-gestated Making Tax Digital project. Sole practitioners have done a lot of soul searching since MTD was first announced. As the April start date for the first tranche of taxpayers draws closer, sole practitioners are looking to make MTD someone else’s problem. For independent firms, this creates an opportunity.

“This market is going to come alive this year,” said Gosling. “We’re going to see a lot of solid independent firms start acquiring sole practitioners and local firms that they’ve not had conversations with before.”

In fact, these conversations are already happening. At the start of last year, Mazuma was one of the most high-profile firms to see this as a massive growth opportunity. “Lots of these firms have had their exit denied to them… ” Lucy Cohen, the founder of Mazuma, told me last year, acknowledging that the £200k to £700k firms might not be massive but they have a “solid and sticky client base”.

Fresh from securing private equity backing from Nordic group VIEW, Cottons is also accelerating an M&A strategy focused on acquiring small firms and sole practitioners. Managing partner Will Smart sees an opportunity to grow the firm by targeting practices with similar clients, while giving owners a route to retire on their own terms. The strategy is as much personal as it is strategic. Having twice been a sole practitioner himself, he says, “I know exactly what keeps them up at night.”

You can see why valuations might be peaking for this cohort as finally MTD takes centre stage. As MTD lowers the income threshold to £20,000 from 2028, the window of opportunity to sell is now.

However, attention could be turning elsewhere. Naturally, this will impact the multiples.

AccountingWEB’s Decision Line Substack is brought to you by the Finance, Accounting & Bookkeeping Show (FAB).

The themes explored in this article — growth, leadership and M&A — will take centre stage across the two-day event at the NEC in Birmingham on 11–12 March. Secure your free ticket today.

Register now

Big year for large firms

The question in the year ahead is at which point will the lion’s share of private equity-backed firms move their focus and attention away from the smaller sub-£4m firms and start turning their attention to the other consolidators and larger players in the market? That’s the next battlefield.

“I have no doubt there will be a consolidator acquiring other consolidators in the market,” predicted Gosling. This moment will come to a head as some private equity firms reach the point of being flipped and start looking for either another private equity sponsor or a sale to another firm.”

Gosling is aware of a couple of conversations that are already happening on this front.

“Whether or not the deals would actually happen this year or not, that’s another matter, especially since we’re talking about large firms here,” he said. “It might take a little longer, but I certainly feel there might be one this year.”

We’ll have to wait and see. Perhaps they may go another cycle before being acquired by a consolidator. They may even roll the dice on the valuations seeing as big US private equity firms have landed on these shores and are engaged in active conversations with the consolidators. Let’s not forget, US-based Lee Equity announced a majority investment in Cooper Parry in December 2024.

Peak in valuations

In short, a lot is happening in M&A. But let’s talk about the numbers. Will this activity push the valuations any higher?

“I can’t see valuations for sub-£1m and up to £8m firms moving too much [higher],” said Gosling. “We’ve had the first couple of flips now and the multiples are up around the 14x to 15x mark for private equity.

“I think those [multiples] are going to stay around for the course of the year. It will be interesting to see when the focus from the private equity firms move further up the chain and if that will naturally mean the peak we’re seeing and the supply and demand at the smaller end of the market – the £1m - £6m firms as well as sub-£1m firms – will mean valuations will start to come down,” explained Gosling.

It’s eye opening seeing how high valuations have scaled. “It was only two to three years ago that a £2m - £3m firm was getting around 5x EBITDA mark – now firms are looking at multiples much higher than that,” said Gosling.

The shift in strategy for private equity firms and the focus on the higher echelons of the market will influence those multiples for the smaller end. “As a result, we may well start to see multiples reducing or settling down,” Gosling concluded.

Roll the dice or not

The figures speak for themselves. When presented with valuations like that, it’s no wonder firms like the anonymous partner decided to roll the dice.

Every senior leader I speak with keeps a close eye on the market. They’re aware of the numbers. An offer will come that’s irresistible to the partners and they’ll go with their gut.

But sometimes it isn’t the money that seals the deal. The model being offered can matter just as much, and no two are ever quite the same.

“A good number run a typical model, but there are always nuances,” said Gosling. “A structure could be 100% buyout, but you could have people who are selling but are remaining in the business for the mid to long term. They could roll their equity into group level, which is a standard buy and build structure that a lot of private equity houses have.

“Within that are other considerations, like how they engage with clients, how they engage with staffing and whether there are growth shares for the younger team that want to get into leadership or ownership.”

Alternatively, there is the shared equity model that the likes of TC Group and ETL offer.

Then there are the unknowns. US capital is still flowing in. My inbox is still filling up with deal announcements. And almost every firm I speak to has ambitious growth plans for the next three years, with some, like AAB, even talking about quadrupling in size by 2030 – and it can’t do that without an insatiable M&A strategy.

And who can really predict what happens next in the profession? As my colleague Tom Herbert discussed on our podcast this week, the last big M&A wave was driven by the emergence of cloud accounting when firms decided they could stitch together multiple offices, even global offices, around a cloud platform. This time, the new catalyst is artificial intelligence.

Particularly in the States, roll-ups are buying traditional firms in the hope that AI will paper over the cracks and make these sprawling businesses run more efficiently. And in the accounting world, we’re always one compliance shock away from more upheaval.

But with the need to buy out retiring partners, an M&A strategy and staying ahead of the curve with tech investments, some firms don’t have the luxury to wait and see. And with valuations as high as they are, firms are going to grasp the once-in-a-lifetime opportunity while it’s there.

Many of the issues affecting mid-tier firms will be discussed at the Finance, Accounting & Bookkeeping Show in March 2026. Secure your FREE ticket today.

Thank you for subscribing to AccountingWEB’s Decision Line.

Decision Line from AccountingWEB cuts through the noise to uncover the real challenges and emerging opportunities shaping mid-tier and fast-growing accountancy firms. Every fortnight, Richard Hattersley offers exclusive insight and sharp analysis.

Please share this edition of Decision Line so we can grow the message further and wider.

Subscribe now

Still, the year is young. So don’t let those first missteps define what comes next.

For the first Decision Line of 2026, I thought it would be useful to look back at some of the lessons from the big interviews I did with boardroom decision-makers last year. The same key themes cropped up repeatedly, and they will continue to shape many of the strategic decisions firms make over the next 12 months.

(Credit: istock_Nadzeya_Dzivakova)

These topics included how to build for a sale, the age-old battle between independence and private-equity-backed investment, and a continuation of the great talent wars. These topics will also be discussed at the Finance, Accounting & Bookkeeping Show 2026.

So when you’ve eventually finished wading through your emails and are back in the swing of the 9-to-5 again, these lessons will help sharpen your strategy for 2026.

Decision Line is a free publication from AccountingWEB. Subscribe to our Substack and receive exclusive content for decision makers in mid-tier and progressive accounting firms.

Subscribe now

Xeinadin’s CEO on M&A, growth, PE and integration

The first Inside the Boardroom interview was with Derry Crowley, the CEO of Xeinadin. I spoke to him shortly after Xeinadin acquired Raffingers. As a PE-backed firm, a lot of the interview was unsurprisingly focused on the influence of the investment.

Private equity not only provided the capital behind much of last year’s M&A activity, but a central takeaway from this interview is its role as a catalyst for accelerating industry modernisation.

Crowley characterised the investment from Exponent as a turning point that enabled Xeinadin to double in size and become a centralised firm.

He argued that private equity investment will “bring the accountancy industry forward faster than it otherwise would have happened”. He specifically pointed to digitalisation, automation and artificial intelligence as areas where the industry will adapt more quickly due to the ongoing investment.

Whenever we talk about PE investment, the focus is often on growth. Sure, the investment propels firms forward towards their monetary goals, but what’s overlooked is how the model helps to systemise firms too.

I spoke to Andrew Rich, the managing partner at HW Fisher, at the start of 2025, and he highlighted that one of the benefits of joining the Sumer group was the investment in technology. Bringing firms together in hubs meant everyone used the same software, making collaboration smoother and giving the group more leverage to negotiate software contracts. As Rich told me, “There’s no point in everyone being on different audit technology, or using different packages with the same tech.”

What to look out for in 2026: The rise of AI only underlines the importance of nailing your technology strategy. The private equity option might not be for everyone, but the benefits of being part of a larger group can help support technology integration. When it comes to PE investment, technology is nearly as strong a motivation as growth ambitions or succession planning… almost.

Menzies on Beever and Struthers merger and growth

Simon Massey from Menzies provided a counterpoint to Crowley’s enthusiasm for private equity investment.

Menzies had just merged with Beever and Struthers to create a £110m-plus powerhouse. The deal bucked the trend of the majority of mergers and acquisitions, which involved private equity investment.

Massey didn’t hold back with his choice words about private equity. He compared the models to the “Emperor’s new clothes” and dismissed the idea that you need this backing to achieve your strategy. “There is always a back story. Sometimes it’s that they’ve undergone an expansion too rapid; sometimes it’s ambition; sometimes it’s retirement that needs to be funded… The key is to have clarity in your strategy.”

Massey also criticised private equity models as potentially disadvantaging partners under 50, who may end up “giving away too much of their potential income” compared to the traditional equity partner model.

What to look out for in 2026: The Menzies-Beever Struthers deal shows that PE backing isn’t the only route to expand your geographical footprint. This year, independent firms will continue challenge the private equity model and prove that growth can be achieved on their own terms… while just as many will likely take the investment.

AAB’s CEO on Goldman Sachs, M&A and private equity

Goldman Sachs Alternatives’ acquisition of AAB was one of the most significant deals of the year. Rumours had swirled of different firms circling AAB, including their rivals Cooper Parry. I spoke to Emma Lancaster, the CEO of AAB, in September last year, a few weeks after the deal went public.

What stuck with me was the work Lancaster and her team did pre-sale. With so much M&A action happening last year, it’s easy to forget the countless hours of due diligence and grafting behind the scenes to get the deal over the line.

Lancaster pulled back the curtain of the process of selling the firm, likening it to selling a house. “You paint the walls, you plaster and fill in the cracks, bake bread, and then you put the ‘for sale’ sign outside the house, and that’s the moment the process starts. Lots of people then come and you’re looking for someone to fall in love with the business, and luckily for us, someone did.”

She also emphasised how critical data was in the deal. “You need to have a good understanding of your data and what it means,” she said. “Any questions that came, we had all the answers.”

Alastair Barlow, the co-founder of flinder, said something similar when I spoke to him in May of last year. After going through the process, his advice to anyone considering selling a firm is to get your data in order. “When they look at your last 24 months of management accounts during the due diligence process, column by column, you’ll need to be able to explain the variances and understand what the story was,” he said.

What to look out for in 2026: Not enough can be said for having a grasp of your data. If you’re looking to make a sale this year, data needs to be at the top of your list.

HaysMac’s managing partner on growth, independence

One of the key themes in this interview with Natasha Frangos, the managing partner at HaysMac, again centred on the battle between independence and private equity investment. I won’t spend too much time on this point since we’ve already covered that in the Simon Massey interview above. But it’s worth emphasising that firms like HaysMac are strategically leveraging their independence as a differentiator, setting themselves apart from the consolidators.

Instead, I’d like to highlight another key discussion point: solving the talent shortage. It’s a theme that constantly nags firms, and I expect this to continue into 2026. HaysMac’s solution for solving this perennial trend extends beyond just recruitment.

Rather than relying on third-party outsourcers, the firm has established an international office in Cape Town, South Africa, a country that’s become a bit of a hotspot of audit talent.

The firm is a staunch believer in the grow your own concept, too. Frangos herself is a great example, having started at the firm as a trainee and climbed the ranks to managing partner. Additionally, the firm’s recent rebrand from HaysMacintyre to HaysMac was also done to modernise the brand, thus making it more attractive to new talent.

Meanwhile, HaysMac can thank the ripple effect of consolidation for some of its lateral hires, after talent became available when they left their previous firm following an acquisition.

There is no single solution to the talent crisis in the profession, but as these examples demonstrate, there are multiple ways to get talent through the doors.

What to look out for in 2026: The talent crisis hasn’t gone away. Expect capacity issues to continue. For firms chasing growth, resolving any talent problems must come first if they want to meet their targets. Obviously, AI is part of the strategy, but you need the right team first.

And finally… the big trend to watch out for!

The one theme that ran through every interview I did last year was growth. Menzies wants to be a £200m firm by 2030. AAB aims to quadruple in size by the same year. HaysMac has its sights set on £100m by 2028. Ambitious goals are no longer optional.

Of course, M&A will remain critical to that success. The constant stream of press releases featuring smiling senior leaders shaking hands outside offices shows no signs of slowing down in 2026, complete with phrases about “geographical footprints” and becoming “national powerhouses”.

Staying the same size is no longer a strategy in this world. But growth by itself is not a strategy either.

The interviews I did last year all serve to answer that central growth question. The takeaways show there is no single answer to the growth conundrum. These leaders know M&A alone isn’t the answer. Their focus is equally targeted on organic growth and lateral hires.

Firms must have a combination of all of these attributes if they’re going to meet their growth ambitions: Standardising systems, fixing data black holes, integrating culture, getting the right people and trying to grow without breaking what built the firm in the first place - that is where growth strategies will succeed or fail.

These attributes will be discussed across the content programme at the Finance, Accounting & Bookkeeping Show on 11-12 March 2026 at the NEC, Birmingham. If you’re looking to scale your firm, secure your free ticket today.

It may be past cliché at this point, but “accountancy is a human-to-human business”. There’s a good reason why this is the Pavlovian response whenever any mid-tier leader speaks about the profession – because it’s true. Without people, what is an accounting firm? Please don’t spend too much time pondering this existential question.

Thanks for reading AccountingWEB’s Decision Line! Subscribe for free to receive new posts every fortnight.

Subscribe now

(Image credit: iStock_Nuthawut-Somsuk)

Recruitment and retention

I don’t even need to pick up the phone to know leaders are obsessed with their people strategy. Every year, entries to our Accounting Excellence Awards tell us that one of the biggest issues facing their firm is recruitment and retention.

This past year’s crop of entries was no different. The biggest issues, in reverse order, were: regulation, training, AI and automation, recruitment and retention and then capacity to scale. And frankly, you could argue that all of the issues boil down to recruitment and retention.

It’s why we’re putting the spotlight on these big concerns across several sessions at the Finance, Accounting & Bookkeeping Show on 11–12 March 2026 at the NEC, Birmingham.

Secure your FREE ticket

The concerns are reflected in the entries themselves. Mid-tier firms are loudly talking about the investment they’re making in people. And it makes sense: the current landscape is enough to motivate these firms to prioritise their people.

How did we get here?

Before we look at what firms are actually doing, first, we need to understand why it’s got to this point. The issue really stems back to those other mid-tier conversation starters: consolidation and digitalisation.

Private-equity-driven consolidation has caused all sorts of brouhaha in the profession, not least in the talent space. Understandably, independence has become a key differentiator.

Anecdotally, a wave of disgruntled employees is spilling out of their newly acquired firm and is seeking new opportunities. The availability of senior-level talent hasn’t gone unnoticed in my conversations with mid-tier firm leaders. A common theme in those conversations is firms talking about the lateral hires they’ve made, many of whom are skilled and experienced talent who wouldn’t ordinarily be available.

According to one mid-tier leader I spoke to earlier this year, a lot of the talent pool is sitting around to see what happens after being acquired: “The [consolidators] come in with energy, saying they’re going to change things, and it’s all about growth. The people might sit around for a couple of years, but now they’re starting to say, I’m going.”

But other factors are also at play. Audit, for example, has an image problem, which appears to be turning new talent off in droves. “No one wants to be an auditor anymore,” one mid-tier firm leader told me earlier this year, whose firm has responded to this crisis by offshoring audit capacity through the acquisition of a practice in South Africa.

Salary expectations are also adding to the talent drain. The pull of industry was raised to me as another reason why some mid-tier firms are experiencing high talent churn.

The advance of AI

Then there is AI. The Big Four has already cut back its graduate intake, with AI instead picking up the entry-level work that was once given to trainees. Research from Indeed showed that accountancy firms have posted 44% fewer graduate job adverts this year compared to 2023.

The ripple effect of this will be felt elsewhere within the profession, as less talent flows into the accounting workforce. In some ways, the profession still hasn’t recovered from the global economic crash in 2008, when the Big Four reined in their training programmes and budgets.

The rise of AI has created more competition. As the former CEO of flinder, Alastair Barlow summed up a couple of years ago: “There seem to be fewer people coming into the profession because there are other competing professions for the same talent or same skill sets that people have, like data analysis and analytical skills. So there’s a diluted pool.”

AI is also changing what firms require from new talent. For example, Azets announced recently that those joining the firm will move into “advisory roles”, leaving AI to automate the grunt work traditionally done by graduates.

“It’s a case of using technology to enhance the work our junior staff do rather than replacing them,” said Peter Gallanagh, UK&I CEO at Azets, who also made headlines in the Times for suggesting that young accountants could be seconded to “front of house” stints in pubs, hotels and restaurants to gain people skills.

The mid-tier response

So, that’s where we are now, but you didn’t read this far to understand the background; you want to know what firms are actually doing to recruit and retain talent.

Returning to the 2025 Accounting Excellence data, mid-tier firm finalists have addressed talent headaches through strategic investments, opening up progression pathways and focusing on flexibility and wellbeing.

Let’s start with strategic investments. Here, firms focused on recognition schemes as a key driver to keeping their people happy.

One firm introduced a “thank-you fund”. This is a quarterly reward that replaces the annual bonus, built around four KPIs: two firm-wide (growth and client service) and two personal, both focused on development. The firm noted that “the team appreciates having clear direction… and being rewarded at more regular intervals.”

Another firm implemented a quarterly bonus scheme, alongside an internal recognition scheme, based on its five core values. Here, the firm dished out eCards and vouchers to show their appreciation.

Transparency and progression

Making employees feel appreciated is one thing, but the next generation wants to know there are progression pathways – this is the second key trend.

For some, the classic show-don’t-tell approach goes some way to show employees that you’re serious about progression. One firm reported that internal promotions increased by 260%, while the average partner age is now 42. It’s one thing to say the firm is about progression; it’s another to actually provide a pathway.

It’s the reason why transparency kept coming up repeatedly in the entries. Firms are further formalising this through developing interactive organisational charts that map out roles and responsibilities across the business.

“This has provided the whole team with a clear understanding of expectations in terms of the level they currently operate at, as well as points of development to secure promotions,” noted one mid-tier finalist, adding that the internal chart also facilitates more productive conversations around personal development during the bi-annual appraisals.

Firms are not only providing clear paths for promotion but are also engaging high-potential junior employees in strategic planning from an early stage. One firm established a “next-generation board”. This think tank acts as a development platform for bright young talent and a “catalyst for fresh thinking that challenges established practices”. The firm noted that the board’s recommendations have already led to streamlined workflow processes and technology improvements.

Structured learning is another popular trend to future-proof talent. All of the finalists described how they had prioritised continuous professional development. One firm highlighted its monthly dedicated self-led CPD training (called PowerHour+), while another explained how it supports trainees through monthly in-house training days and a comprehensive support framework. Another finalist explained that “up-and-coming team members” receive mentorship from partners.

Some of these training techniques will be discussed in more detail at FAB, where HaysMac’s Thabiso Matsau will share how firms can design and deliver impactful technical training that resonates across generations and experience levels.

Flexibility and wellbeing

Enhanced training, bonuses and transparency around career progression are tools for retaining employees, but a key driver in attracting talent is mid-tier firms’ flexibility and wellbeing initiatives. The finalists had a lot to say here.

Firms discussed offering full flexibility with hybrid working. Obviously, the definition of hybrid working differs from firm to firm, but the acceptance of remote working has changed since the Covid lockdown forced the whole of the UK to take their laptops home.

It’s also enabled regional firms to expand their recruitment reach nationwide and retain people for the long term. Other firms have introduced a 2pm finish on a Friday, although team members still have to make up their hours at the start of the week.

That said, workers are spending more time at the office these days. Some of this is out of necessity, especially for trainees to gain new experiences and learn through osmosis. Equally, some young people want to spend time in the office for the culture.

That sense of belonging can’t be overstated. With the talent crisis as it is, now is not the time for firms to press ahead with Dickensian working conditions. Instead, the mid-tier finalists went to great lengths to explain how they listen to their staff. Just as client surveys have become commonplace among mid-tier firms, so have staff surveys.

These surveys not only help gauge employees’ happiness levels but also ensure firms continuously improve and become more productive. A good example is one firm that listened to staff feedback about what slows them down, discovered a common theme was delays in getting client records, which led to bank feed adoption.

And then there’s the cuddly, feel-good, holistic support. Examples of what some firms are doing here include an annual wellbeing allowance to support fitness and self-care, extra leave for birthdays and volunteering, and a social calendar of events.

One firm even has a dedicated chill zone in the office where employees can use mindfulness resources and just enjoy the peace – I suspect this area is busier at some points of the month than others.

Limited in what you can do

These mid-tier firms are reporting high levels of employee retention through having a people strategy, but no matter how much they’re prepared to invest in their team, the risk is that external factors end up wagging the dog.

AI and consolidation aren’t going anywhere. If anything, both forces will intensify faster than firms can adapt. Firms can’t control consolidation or AI, but they can control whether their people want to stay. And that’s why senior leaders always bring the conversation back to talent.

Many of the issues affecting mid-tier firms will be discussed at the Finance, Accounting & Bookkeeping Show in March 2026. Secure your FREE ticket today.

Brand refreshes are becoming a strategic response to consolidation, and as Buzzacott’s website refresh demonstrates, some firms are using them to tighten culture and accountability, not just aesthetics.

So this week, we’re looking at how mid-tier firm Buzzacott turned its rebrand into a statement.

Subscribe to our free Substack for insider insights and stories from mid-tier firms driving growth. As a subscriber, you’ll get content not available on AccountingWEB.

Subscribe now

Mergers and private equity-backed deals are not just shaking up the firms directly involved - they’re also indirectly pushing independent mid-tier firms to rethink their identity to stay competitive.

Earlier this month, Buzzacott was the latest to tug the proverbial royal golden rope, unveiling a refreshed brand and snazzy new website for this very reason.

Stories of website rebrands often land in the AccountingWEB editor’s inbox. Though important for the firm as drivers for converting prospects and attracting talent, the news may not always warrant a 1,000-word write-up.

Rebranding to stand out

The Buzzacott rebrand felt different, however. Sure, the new identity introduces a “sharper, more flexible design system” and a new website structured around clients’ needs. But the rebrand goes deeper than that. It coincided with a shift in the mid-tier; a recognition that independent firms must stand out and exude their independent identity if they want to compete with the PE-backed rivals.

Buzzacott said as much. “There’s a lot of private equity scooping up our competitors, and a lot of consolidation in the market,” explained Romina Gaudiosi, head of growth at Buzzacott. “We asked how we differentiate, and not just visibly, but through our messaging, clarity of what we do, who we are.”

(Photo credit: iStock_Sebastien-Mercier)

She added: “We now have a purpose which is all about independent minds, sharp perspectives, confident futures. It’s not a strapline. There are no gimmicks in this exercise because it was something we just wanted to have as an authentic identity.”

In the middle of a PE storm

Buzzacott’s decision to spruce up the brand and launch this introspective exploration into its ‘why’ makes complete sense. With 57 partners, more than 600 people and revenues of £90m, the London-based firm finds itself smack bang in the middle of the private equity tornado.

But Buzzacott hasn’t been swayed by the allure of external investment yet; it’s still flying the flag of independence. Gaudiosi maintained that remaining independent keeps the firm “agile on our own terms”.

“It means we don’t have the pressure from an outside firm that’s perhaps a little bit more ruthless, shall we say, with targets and things like that. We still have those, but I think it’s remaining independent feels really important culturally,” she added.

The battle between independence and private-equity investment is one of the biggest talking points among mid-tier accounting firms. The Finance, Accounting and Bookkeeping Show (FAB) will explore the different paths for growth across the two-day event on 11-12 March 2026 at the NEC, Birmingham.

Secure your FREE ticket now

Responding to M&A ruckus

The ruckus caused by the lively M&A market has prompted more independent firms to talk loudly about their brands.

It’s like when a brand-new superstore opens near the high street, with a floodlight-lit car park the size of several football fields and a brand logo above the entrance as recognisable as the jingly-jangly theme used in their nationwide advertising campaign. Suddenly, the independent store with a long heritage starts to look a little shabby, despite its claim to offer a more personalised, boutique service.

It’s funny then that Gaudiosi used the shop-front analogy as one of the triggers for Buzzacott’s rebrand. She joined the firm two and a half years ago, but after 12 months she realised “the shop front just doesn’t reflect who we are as a firm”.

She concluded: “The whole identity - both brand and digital - just wasn’t fit for purpose.”

A trend across mid-tier firms

Thus, the brand refresh was given the go-ahead. The motivations behind the update echo those of HaysMac, which undertook a similar exercise, leading the firm to knock the ‘intyre’ from their name.

Natasha Frangos, managing partner at HaysMac, told AccountingWEB the brand needed to be “modernised,” including its colours and language. For her, the goal was a brand “more reflective of what it’s like when you meet some of our team in person.”

Albert Goodman, another independent firm, shared similar thoughts when I spoke with them. Its attempts to stand out as an independent led to a brand new pink look and logo. Robin Clempson, a partner at the south west-based firm, told me that the brand helped make the firm more distinct and ensured that a “potential client thinks of us more easily”.

The firms I’ve spoken with about their brands don’t spend too long dwelling on the colour scheme. Sure, it comes up, but the main motivation behind the update is always culture and clients. For independents, both of these act as a battleground against the consolidators - and if you ask them, it’s these points that differentiate them from the target-driven consolidators.

Getting to know clients better

Rebrands like this go beyond a nip-and-tuck. The process is as much about redefining the firm’s vision as it is about refreshing its look. Buzzacott worked with a creative agency and held workshops to understand who they are.

If anything, the rebrand helped Buzzacott better understand its clients. “We had clients at the heart of the testing phase,” said Gaudiosi (pictured below). “It wasn’t a navel-gazing exercise; it was something we really thought through. It just reaffirmed the firm’s purpose.”

Clients were asked about their experience working with Buzzacott and what they actually know about the firm. “It was a matter of compiling lots of feedback. As we went through the process, we tested different concepts [for the website] before we landed on the finished product,” she said.

The process further mapped the journey a client takes from a prospect to a client. “There are multiple touch points before they become a client. We spend a lot of time getting to know people. Sometimes it’s a simple referral and word of mouth,” noted Gaudiosi.

(Photo credit: Romina Gaudiosi, Buzzacott)

Client listening was an important, but not entirely new, part of the process, with Gaudiosi adding: “Our client retention is high, and we think that’s partly because client listening is part of our DNA.

“I know probably lots of firms say that, but we’ve actually got some discipline around asking clients what they think post-advice. Whether we’ve won or lost a piece of work, we’ll always try to understand why.”

Behaviours, not values

Before this exploration, Buzzacott had a set of values threaded through various handbooks and web pages. But off the back of the refresh, they decided to create a set of practical behaviours, instead. These have replaced the values.

To some, this may sound like marketing buzzwords, but the switch from ‘values’ to ‘behaviours’ is more of a shift than you might think. It puts accountability at the heart of client service.

It reminds me of a conversation I had with Kreston Reeves about its ‘client promise’. A client pledge alone, slapped on a poster or painted on a wall, might add to the office decor, but that’s all it does. Instead, Kreston Reeves embedded its client promise within performance reviews for fee-earning members of staff.

Buzzacott appears to have gone down the same route. “People are measured against [our behaviours]. So it’s quite a change to what we had before,” said Gaudiosi, who will be discussing this more in an upcoming firm-wide conference.

Careers and specialisms

As independents compete with larger PE-backed firms for clients, another battlefield is skills, with the website refresh also serving as a showcase to attract new talent. Previously, the firm had a separate careers website, but they’ve now combined the two.

With a large graduate intake (currently around 200), the updated visuals also play well in attracting the next generation. “Our trainees make up about a third of our firm, and nowadays, I think young people really notice if a site isn’t quite up to scratch. So just making the website look more modern and actually fit for talent was a driver from a recruitment perspective.”

For prospective recruits, Buzzacott has also leaned into several distinctive touches to set itself apart from the larger, private-equity-backed firms. A good example sits loud and clear under the ‘about us’ section on the website’s navigation bar: ‘Environmental, Social and Governance’. Something Generation Z clearly cares about.

ESG is included in the firm’s four pillars alongside people, innovation and performance. Sustainability was a key part of the project, with all new branded materials produced by suppliers with strong ESG credentials. “We wanted to make sure we could back up what we’re doing with clear evidence and data. We’re not using it as a bolt-on; we’re threading it through the everyday.”

A website is not just a website

Yes, a website is still a website. In the world of zero-click search, websites may not carry the same clout as they once did. A rebrand and a new website alone don’t guarantee growth. It just declares intent.

However, this story represents a shift bigger than a new website. As debated in my previous Substack, private-equity-backed firms are just getting bigger, and with that comes the risk that independent firms will be left in the shadow of these behemoths.

In this competitive environment, independent firms must be more deliberate with their actions. A website is not just a website; it’s a strategic act. Buzzacott was very intentional with the launch of the new website, highlighting that it’s staying independent and the website is an example of its investment in growth.

So yes, a new website in itself might not stop the printing press in the same way a big merger might; however, the subtext does.

As more in the mid-tier are turning to external investment, independent firms are boldly proclaiming their independence. The story of Buzzacott’s new website isn’t about a new colour scheme; it’s about their investment in growth.

“While many of our competitors are merging, we’re proving that staying independent can still be a powerful way to grow. This brand refresh will give us the momentum to keep that growth going,” said Tony Hopson, Buzzacott’s managing partner

“Our new identity speaks to our future. For over 100 years we’ve been defined by an innovative strategy and bold decisions, which have helped us get to where we are today. Our brand refresh is another indicator that we’ll continue to lead and innovate as we grow.”

The battle between independence and private equity investment will spill over onto the circle stage at the Finance, Accounting and Bookkeeping Show at the NEC, Birmingham, on 12 March 2026. In a can’t-miss session, senior leaders from independent firms and PE-backed firms will go head-to-head and discuss the best option for growth. Secure your free ticket to the two-day event.

“We are all aware that we will be a smaller player in the market.” That comment from the managing partner at HaysMac cut straight to the heart of the challenge that many independent firms are grappling with today.

As consolidation continues to reshape the accounting sector, are firms that once sat comfortably in the accounting league tables destined to become smaller players, or is there something else happening here? That’s the thread we’re going to pull on this week.

AccountingWEB is the UK’s largest independent community for accounting and finance professionals. Subscribe to our Substack for insider insights and stories from the firms driving the profession’s fastest growth.

This week, I published my ‘Inside the Boardroom’ long-read interview with Natasha Frangos on AccountingWEB. It was a wide-ranging conversation with the managing partner at HaysMac, covering everything from the top 30 firm’s recent rebrand to Frangos’s impressive career from trainee to managing partner and the perennial talent headaches that have plagued the sector.

However, one quote stood out: responding to the rise of consolidation in the market, she said, “We are all aware that we will be a smaller player in the market.”

(Image credit: istock_marrio31)

The place for independent firms

Right now, consolidation is the biggest obsession among mid-tier and large accounting firms (alongside AI and talent, of course). It’s hard not to fixate on it, seeing how fast the landscape has changed in the past 12 months.

Independent firms are putting up a good fight. HaysMac underwent an extensive rebrand to modernise and stand out in the market, resulting in the firm being renamed. This was more than a cosmetic exercise. The process has reaffirmed the firm’s position and identity as an independent firm.

Frangos’s acceptance of being a “smaller player in the market” could also be viewed as a nod to her client base and employees – distinguishing them from the larger accounting giants and emphasising that they will remain independent. And without explicitly saying so, it also positions the firm as one that provides a more boutique, client-focused service.

It’s a growth technique adopted by the 2025 Mid-Tier Firm of the Year, JS Accountants and Business Advisors. As I noted in my previous Substack column, JS argued that PE-backed firms are “driven by short-term returns and aggressive growth targets, often at the expense of long-standing client relationships, staff wellbeing and professional integrity”. There’s an echo of that sentiment in Frangos’s words.

It’s sure to be a talking point when JS managing partner Lucy Williams takes part in the ‘Private Equity vs Independent Growth’ session on the Circle Stage during day one of next March’s Finance, Accounting & Bookkeeping (FAB) Show.

Growth ambitions remain strong

Independent firms still have big ambitions. HaysMac has set its sights on reaching £100m in turnover. Menzies, another independent firm I’ve recently spoken with, clearly signalled its ambition with the acquisition of Beevers and Struthers, propelling them into becoming a £110m national firm.

Yet even these impressive numbers may not be enough to keep pace with the deep-pocketed, PE-backed consolidators. Established PE-backed firms, as well as new entrants, have surged up the accounting league table and are rapidly widening the gap between them and the independent, partner-owned firms. So you can definitely take Frangos’s “smaller player” quote at face value.

Sumer, for example, reached £100m turnover in its first year after snapping up over 30 firms, and now, three years after its launch, Penta Capital, the investors behind the firm, are reportedly exploring a sale. Xeinadin, meanwhile, didn’t even exist before 2019. But after consolidating 115 small and medium-sized practices and continuing to add more firms to its roster, including top 100 firm Raffingers, Xeinadin has become a £155m company as of 2024 and is likely closer to £250m these days.

The pace of this growth has become a recurring topic in industry conversations (and I expect that will be the case at FAB next March, too). At a recent industry conference, several attendees from mid-tier and large firms I spoke with remarked how unrecognisable the accounting league tables look today compared to three to five years ago.

So it’s true that firms like HaysMac, which haven’t taken private equity investment yet, must be feeling like the ground underneath them is shifting and the landscape no longer looks the way it once did. All signs suggest that they will be smaller players in the market, at least for the time being.

Should we look beyond the numbers?

But fee income and league tables don’t tell the whole story. The turnover at private equity firms might be soaring like a shooting star, but ambitions could just as quickly burn out.

“It’s a bit of a vanity metric,” said Bhimal Hira, a partner at Prysm Financial and previously a partner at Jeffreys Henry for 12 years before it was sold to a private equity firm. “If you’re consolidating all these firms together, you’re consolidating all the fees. So the fee income is naturally going to increase.”

Without naming names, Hira noted that none of these fast-scaling consolidators have addressed the messier issues behind fast consolidation, such as staff turnover or other stories that often hide behind the big numbers. “Profitability is one thing, but when you drill into the actual published accounts at Companies House, and especially if they’re audited accounts, it tells a very different story.”

They may have lost big-ticket clients. Perhaps others are now facing legal claims from former partners and employees after allegedly kicking out several partners and failing to pay them. “When you drill a little bit deeper beyond the vanity of turnover numbers and you look at the bottom line and the issues, it paints a very different story,” said Hira.

There’s a risk these fast-scaling firms may encounter other growing pains. They’ve sprinted up the league table, overtaken established partner-owned firms in pursuit of their growth targets, and have consolidated multiple disparate firms into one entity.

They wanted to grow quickly for obvious reasons, but now they’re hovering somewhere in the top 10 or top 20; they have clients that are smaller than you’d expect for a firm of that size. Big problem!

As Hira said, “They’ve got to the top 20, but their client base is made up of top 50 clients.” He added, “You can’t sell that firm to the likes of PwC because the PwC client base is very different.”

An uncertain future

These are not the only issues ahead for the fresh-faced consolidators. The decisions made during the build stage are now coming back to bite some. Sumer opted to allow many of its acquired firms to operate with a degree of autonomy. As David Prosser reported recently on AccountingWEB, this high-risk strategy in pursuit of growth could make these businesses more difficult to sell. But every model is different, and consolidators have taken different approaches.

The goal of any private equity firm is to exit its investment within three to five years. The position on the accounting league table or how far they’ve leapfrogged their competitors doesn’t matter as much as the multiples they receive.

The baggage these firms are carrying may impede their ability to sell. “A potential buyer doesn’t want to inherit that,” noted Hira.

With so many unanswered questions about the future, it’s hard to say whether this will prove to be a lasting problem. In many ways, we’re still in the first phase of this shift. In the next phase, we’ll likely see the consolidators circle each other and pass the firms amongst themselves.

Smaller player – for how long?

As history in the profession – and recent developments in the legal sector, which are several years ahead of the accounting sector – have shown, momentum will stall. When that happens, management buyouts and firm breakups often follow as consolidated businesses fail to achieve the desired return on investment or multiples. If that happens, the narrative could change entirely.

Currently, independent firms may increasingly feel like smaller players. Frangos may be right in her assessment of HaysMac’s future. But it’s important not to compare fee incomes and get dazzled by the high numbers – that doesn’t tell the whole story.

Independents are feeling a little smaller at the moment, but if they hold their nerve, they could prove to be the most resilient players of all. Unless, of course, they receive and accept a very good offer from a consolidator before that.

Over the coming weeks, we will continue to delve further into this topic, exploring what the future holds for independent firms, consolidators, and the accounting profession as a whole. This topic will also take centre stage at FAB in March, where you’ll hear both sides of the story.

At the end of September, the Accounting Excellence Awards celebrated the most innovative and impressive accounting firms in the profession. But beyond the black ties and the disco ball, the Accounting Excellence Awards provide an insight into how these firms are growing. Read on…

AccountingWEB is the UK’s largest independent community for accounting and finance professionals. Subscribe to our Substack for insider insights and stories from the firms driving the profession’s fastest growth.

When it comes to growth, size does matter. The drivers of growth in accounting firms have always differed depending on firm size. But as consolidation reshapes the fabric of the profession, these differences are becoming increasingly stark.

This was no more evident than at the Accounting Excellence Awards, where the winners’ stories offered a snapshot of how firms of different sizes are navigating this shifting landscape.

The trophies may have been handed out for another year, but the winners’ strategies tell a story that extends far beyond one glamorous evening at the Roundhouse in late September.

The large firm model

The final awards of the night were presented to small, mid-tier and large firms. Urban Ledgers, JS Accountants and Business Advisors, and AAB picked up these respective gongs. Together, they really encapsulate what growth looks like for firms of their size.

For the large firm winner, AAB, mergers and acquisitions (M&A) were a clear strategy for their growth. Since taking private-equity (PE) investment from August Equity in 2021, the Aberdeen-based firm has completed 16 acquisitions, extending its regional footprint into the North East of England and Ireland, and cementing its position as a national firm.

AAB is unique here. M&A has become a hot topic for large firms, with so much PE investment sloshing about. Since securing PE investment, AAB has tripled in size, but like a lot of the firms of this size that I speak to, they have even bigger financial goals. Having been acquired by private equity at Goldman Sachs, AAB has its sights on quadrupling in size. Not bad for a firm that in 2021 was sitting at around £25m in revenue.

The rapid growth of firms like AAB has left others to rethink how they can compete with these PE-backed powerhouses. The investment has not only allowed them to scale (and scale big), but use that size to unlock new service lines, like AAB has with an outsourced finance function, specialist tax services and sustainability assessments.

The mid-tier response

With large firms, PE-funded firms are leaving the rest of the accounting league table in the dust, so others have to consider different strategies to compete.

That brings us to the mid-tier, and more specifically, the winner of the mid-tier award, JS Accountants and Business Advisors. While PE-backed firms accelerate through acquisition, JS, like an increasing number of mid-tier firms, are charting a different course grounded in independence.

JS bucked the trend of PE and recently completed a management buyout. They’re now committed to remaining independent, saying that “independence isn’t just a label” but that it means they’re free to make decisions that align with their values, serve their clients’ best interest and protect their culture. This, they say, is their competitive advantage over the profession’s big dogs.

Increasingly, mid-tier firms are brandishing their independent colours. Take this JS quote as evidence: “As private equity investment increases, we are seeing more firms driven by short-term returns and aggressive growth targets, often at the expense of long-standing client relationships, staff wellbeing and professional integrity.”

As consolidation continues, more independent firms see that their growth path is through independence, pushing back on the “commercially driven PE firms” and talking loudly about their service standards.

Focusing instead on the hearts and minds of the clients is a winning strategy. The majority of JS’s new business comes from word-of-mouth referrals and professional networks, with client numbers increasing by 9.66% and revenue growing in a similar trajectory.

Small firms go niche

The look and feel of growth-minded small firms is slightly different again. Urban Ledgers, the winner of small firm of the year, is differentiating itself from mid-tier and large firms that have the size to scale faster by going ultra-niche and focusing more on sustainable growth.

For starters, the small firm winner focuses exclusively on a micro niche in the video games industry. Obviously, they can’t compete with the larger firms that can serve multiple sectors; instead, their focus is on becoming the “go-to experts”.

They have created a velvet-rope-style service, where they have kept their client base purposely small. Through this, they can provide support across the full finance cycle and understand their clients’ challenges with an all-in-one accounting, tax and strategic advisory service.

Due to their size, they’re able to operate differently from their larger counterparts. They have a 100% remote working and flexible team, which helps them to compete on the talent front against larger firms that have returned to the office-based work environment post-Covid.

Many paths to growth

Growth remains a universal goal for all firms, no matter their size. Now more than ever, the way those firms achieve growth couldn’t be more different.

At one end are investment-fuelled firms like AAB, which are scaling at a pace, accelerating towards multi-million pound growth and redefining what large really means. At the other end are independent firms that are building their strategy around their autonomy. Then there are boutique players like Urban Ledgers, who are demonstrating that sector expertise and agility can also be a path for growth.

As the makeup of the profession continues to change through the consolidation, expect the divide between the haves and have-nots to widen – but so too will the strategies. In accounting today, growth isn’t one-size-fits-all. It’s about knowing exactly who you are, and doubling down on it.

(istock_Roman Budnyi)

Cinephiles may immediately recall the closing sequence from The Usual Suspects. I won’t spoil the twist, but I’ll just say the film concludes with a federal agent realising the identity of the criminal mastermind. As the agent pieces together the clues, he drops his mug of coffee in shock, sending the contents spewing over the floor.

Had I held a mug of coffee when I recently reviewed the Accounting Excellence Awards finalists, I would have recreated this scene and spent the rest of the afternoon mopping the carpet with a damp tea towel and plucking out porcelain shards.

Mug-drop moment

My mug-drop moment happened after I uncovered just how interconnected the concerns are for accounting firms of all sizes: recruitment and retention was the biggest challenge (cited 28.5% by firms of all sizes), then artificial intelligence at 21%, followed by growth at 19% and sneaking up in the third line was private equity and market consolidation at 9%.

It is even more revealing when you filter the results by firm size. Most of the percentage concerned with managing growth comes from small firms, which was their biggest challenge. But for mid-tier and large firms, AI and recruitment are separate from the rest of the pack.

Recruitment remains the biggest concern for 60% of large firms. Then came artificial intelligence, which was referenced by half of the large firm finalists. It was a dead heat for mid-tier firms. Concerns regarding both AI and recruitment were cited by 40% of firms.

By now, the mug had started teetering in my hand. It’s all connected, I may have muttered to myself.

It’s all connected

The lack of available talent has sat at the top of our list of concerns as far back as 2018/19. It hasn’t really budged from the top slot. The challenge remains today, but the reasons are different now.

Firms have tried and tested solutions like outsourcing and automated tools over the years, and these have successfully plugged the gap, but they have a new answer to their talent prayers and their search for greater efficiency and productivity.

You guessed it, AI.

The connection between the two concerns becomes even interconnected when you throw in struggling sectors in audit. As some finalists said, the market is exceptionally competitive for skilled auditors at the moment and without these, firms risk missing out on business opportunities. A small percentage of these firms mentioned that they were looking at AI use cases for audit, hoping this could potentially relieve their strain.

Yet, at this stage, the investment seems varied, from using systems to reduce admin and specific off-the-shelf solutions.

Recruitment and retention has always been influenced by the latest challenge of the day. Just replace AI with automation, cloud or their compliance shock cousins like Making Tax Digital and firms soon realise that they haven’t got the skilled people to tackle the problems du jour.

Private equity creates triple threat

This is the second year artificial intelligence and the talent crisis have topped the league table. However, the difference maker this year, and what caused the mug to tumble to the floor, was the sudden rise of private equity and market consolidation. Combined, these concerns have created a ‘triple threat’ for firms.

While it’s a newcomer on the list of concerns, and currently cited by only 30% of large firms and 10% of mid-tier firms, the tentacles of private equity influence are wrapped tightly around AI and the talent crisis and have intensified both of those issues.

Cue the dramatic music and Usual Suspects-style finale montage:

One of the large firm finalists noted that their investment in AI and tech was driven by the need to compete with private equity-backed firms. Meanwhile, private equity becomes even more attractive to firms struggling to grapple with the advancements in AI. I’ve heard of a couple of specific examples of firms turning to PE investment because they needed support with AI and other software.

Private equity is having an impact on recruitment, too. In my conversation with Andrew Rich from HW Fisher earlier this year, the managing partner explained that one of the reasons they took private equity investment and joined Sumer group was because being part of a larger group helped broaden their tech integrations and solved the conundrum of creating a pathway for young people into equity, who couldn’t ordinarily afford to do so, through offering shares in the business.

This is one way of retaining talent. Others have used PE investment to increase headcount through consolidation, solving the recruitment challenge with one blank cheque.

A competitive landscape you can’t ignore

This has created a fiercely competitive landscape for independent firms. They’re now having to take more bold decisions to attract and retain talent. Bishop Fleming, for example, are now making long-term commitments to develop their own apprenticeship programme. Or, like Pocknells, they’re having to make sure they’re ahead of their tech stack and actively exploring AI-led efficiencies.

So while the usual suspects – AI and recruitment – remain the headline concerns, private equity has disrupted the entire plot, and as a result has made these three critical trends inseparable.

Now, mid-tier and definitely large firms looking to address one of these challenges effectively will have to also tackle the other two in tandem. Those ignoring private equity’s influence may soon find themselves outpaced.

To borrow one final line from the 30-year-old film I’ve already over-referenced: “The greatest trick private equity ever pulled was convincing the profession it didn’t exist.”

Now where did I put my mug…

(istock_Riza Azhari)

Take private-equity (PE) investment or stay independent? Across the UK, accounting firms are weighing up this very question. Many have taken the first option – and who could blame them?

The motivations vary: buying out ageing partners, hitting a funding ceiling after a period of rapid expansion or the drive to scale quickly. And sometimes, the founders, after putting in the hard yards, are just ready to cash their chips – and good for them. Even Grant Thornton decided to take £1bn PE investment despite recording revenues of £724m last year.

Whatever the reason, private equity has made an indelible mark on the profession and has started to change the look and feel of accounting firms. Soon the aggregators will reach a point where they’ll start circling other consolidators and the big fish will become even bigger.

It’s hardly a new story. The accounting profession has been here before: there was once a Samuel Lowell Price before there was a PwC, after all.

Independent firms face tough competition

So where does this leave independent firms? No question, it’s going to be tough. PE-backed firms can command more bang for their buck. They have greater leverage to negotiate better IT contracts and investments, amortising the costs across more people than their smaller rivals. And as the organisation increases, they’re able to offer a breadth of new services.

For independent firms, it’s harder to reach that critical mass to compete. As the PE-backed organisations expand like amoebas, the gulf in size of firms across the accounting league table could widen.

With all the PE-backed consolidation happening at the moment, a managing partner in an independent firm candidly told me that they’re aware that they will likely become more of a smaller player in the market.

Independent firms can still compete

Yet, the recent merger between Menzies and Beever and Struthers shows that independent firms can still be audacious in their growth plans and compete with the PE-backed big boys. The merger will create a £110m national firm with a workforce of more than 1,000, with ambitions to become a £200m firm by 2030.

When I spoke to Simon Massey, the managing partner, for the “Inside the boardroom” long read on the merger a couple of weeks ago, he steadfastly committed to remaining an independent firm. To him, private equity is a bit like “the emperor’s new clothes”. He argued that it removes financial incentives for leadership and the deals are potentially a disadvantage for partners under 50, due to reduced income.

But he acknowledged that independent firms with a £10m turnover might struggle to keep pace as the consolidators increase in size. So what’s the alternative?

Best of both worlds?

Perhaps it’s not a binary choice. The devil is always in the details of the deal. No model is the same, and if firms strike lucky, there is always the “have your cake and eat it” option, where investment supports the long-term future of the firm and independence is retained.

Nikki Adams, the co-managing director of Ad Valorem, who was a guest on this week’s No Accounting for Taste podcast, seems to have done that. Around 12 months ago, Ad Valorem merged with ETL Global.

After 20-plus years in practice, Adams and her husband Nigel had undertaken a number of acquisitions funded through their own profits and growth, and reached the point where they had too much debt and personal risk, and they started looking at their succession plan.

They started to look at the different models out there. The ETL deal aligned with what they wanted: it’s a shared-equity model and the management team retained a stake in the business.

“It enables retiring partners to retire over time,” Adams said. “I know a lot of the private-equity models are based on potentially the owners exiting straight away, which is quite tough on clients. It’s quite tough on the team to manage that, too.”

The investment secures long-term funding while giving the team the option of buying in, which solves the succession problem. “A lot of the issue with the partnership models is that it’s all very well, providing you’ve got partners coming through that can buy out the partners that want to exit. So there’s all this rotation of control and power,” she said.

The investment provides the best of both worlds: independence with resources to continue sustaining it. But this kind of deal isn’t on the table for all firms. A lot of firms of Ad Valorem’s size are getting bought out as a 100% acquisition.

The impact on the profession

The impact of this brings us full circle. Private-equity houses show no signs of slowing, leading to consolidators getting bigger and mid-tier firms eroding. So, whether a firm goes down the PE route or remains independent, they can’t ignore the impact.

Ultimately though, accountancy is a people business. Success depends on whether clients and talent are happy. On the client side, private-equity firms have more resources to offer services that independent firms can’t. It would be very difficult for an independent firm to compete with the range of services. They can make lateral hires to roll the dice on a niche, but it would be harder to do this at a scale.

Yet Massey counters that partners in his independent firm are owner-managers like their clients and this is a differentiator to their PE-backed peers, so they can empathise more.

Similarly, Wes Rashid, the co-CEO of Accountancy Cloud, built on this on the No Accounting for Taste podcast: “Independent firms have built those long-term relationships. They might risk being outspent and squeezed by the larger firms, but ultimately having the long-term relationship with the clients, they’re delivering value for them and they have the culture and they have the team and talent in them to keep delivering for them.”

After Covid, Brexit and various tax regime changes, this is the latest challenge for firms. Those deciding to remain independent will have to think long and hard about how they position themselves in order to be attractive to clients and talent. While those going down the PE route will have to countenance the long-term impact too.

“Clients are well known for sticking with accountancy firms for many years. They will move if they’re unhappy, but they will stay if they’re really happy. And from my experience, that is the critical trigger point,” said Rashid.

Understanding this is key to thriving in this new world. Whether PE-backed or independent, firms that prioritise relationships will be the ones that endure.