Professional & Business Services: 2025 Market Review & 2026 Outlook

The M&A market in 2025 remained selective but strategically active, reflecting broader trends of lower overall volume driven by structural and macroeconomic factors, but with a focus on higher value and transformative transactions. 

Within Professional and Business Services, activity levels held up comparatively well. These sectors - encompassing accounting, legal, consulting, and specialist advisory firms - continued to attract private equity interest (seen in c.74% of BDO deals) and consolidation plays, particularly among mid-market players with predictable / recurring revenues or niche capabilities. 

Looking at key sub-sectors: 

• Accounting: Sustained PE and strategic interest persists in this highly fragmented market. Consolidators are pursuing buy-and-build strategies to scale operations, enhance margins through technology and offshoring, and expand service lines. PE activity is concentrated on firms with strong recurring revenue streams where client relationships are sticky and earnings are more predictable (audit, tax, compliance, outsourced finance), while specialist practices (restructuring, forensic accounting, ESG and transaction services) are increasingly attractive due to higher-margin advisory potential.
• Legal: The UK legal sector is undergoing structural transformation and remains a prime target for consolidation. PE interest has been strongest in high-volume, consumer-facing practices (e.g., family, insurance, conveyancing, medical negligence) where cash flows are stable and key-person risk is lower, alongside specialist niches such as entertainment and intellectual property (patent and trademark), which typically generate recurring revenues from renewals, whilst also offering upside from litigation support.
• Consulting: M&A is driven by buyers seeking differentiated capabilities rather than scale alone. The sector remains attractive where firms have defensible niches, strong client retention and scalable delivery models. PE activity is focused on specialist consultancies in areas such as digital transformation, data & analytics, ESG, cybersecurity, healthcare and financial services. Buy-and-build strategies continue to expand capabilities, deepen client relationships and strengthen earnings resilience.

2026 outlook

Private Equity investment: We predicted significant investment into the PS sector during 2025 which has proved to be the case, with Private Equity firms attracted to the sector’s resilience, growth prospects and consolidation potential.  We anticipate this to continue during 2026 as new entrants continue to back ‘platform’ assets, and those with existing investments continue to deploy capital via bolt-on acquisition activity.

International expansion: Consolidation over the last 18-24 months has tended to focus on UK assets acquiring or merging with other UK companies in order to add scale, access to new sectors/services, or geographic expansion.  During 2026 we anticipate UK-based Professional Service firms to look further afield, targeting new markets in overseas territories.  Not only will this allow firms to access new international geographies, but it should also provide access to faster growing regions in order to support overall growth across the group/firm. 

Digital transformation & AI: We expect Professional Services firms to continue their digital transformation journey during 2026, particularly with respect to the use of AI.  With respect to the latter, those firms further along their AI & machine learning journey should start to reap the benefits in their operating model, leading to improved profit margins and likely reduced hiring demands at the junior grades.

Platform investment and productisation: Firms are investing in platforms that turn repeatable work into scalable products. This includes knowledge systems, workflow automation, client portals, and toolkits. The result is more consistent service delivery, better pricing power, and firms can scale without needing to hire proportionally more staff, making firms more attractive to investors.

Interest rates on downwards trajectory: The Bank of England has reduced the base rate four times this year and economists are predicting further cuts during 2026. This should act as a stimulus for M&A activity as the cost of borrowing decreases, making transactions leveraged by variable debt instruments more attractive.

Impact on accounting standard changes on deals: The much-trailed introduction of FRS102 changes finally come into effect from 1 January 2026 for a number of companies.  Buyers and investors assessing valuations will need to take this into consideration, particularly where historical, current or forecast EBITDA is adjusted in line with the new standards.

ESG remains an important factor: Despite potential challenges from certain global leaders, it is clear that the vast majority of companies, including the talent employed by those companies, view ESG positively.  As such, we believe that we will continue to see Professional Services firms who have a clear ESG-agenda thrive during 2026, both in terms of investment attractiveness and ability to attract talent.  Moreover, there is a growing area of advisory services for Professional Services firms to support clients on ESG, carbon transition, sustainable business models, and impact measurement.

Pricing model evolution: Professional services firms are shifting away from time-and-materials billing toward subscriptions, managed services, and value-based pricing. Clients want predictable costs and clearer outcomes, so firms are packaging services into fixed-fee or performance-based arrangements. This creates more stable, recurring revenue and improves margins. The trend is expected to accelerate in 2026, especially in areas like technology, compliance, and outsourced finance.

Talent strategies and workforce structure: The traditional pyramid model is being replaced by more flexible staffing approaches. Firms are using project-based teams, specialist talent pools, and outsourced delivery, supported by automation and AI. This helps reduce costs, boost productivity, and retain senior expertise while accessing specialised skills more efficiently.