Industry update: Professional services

While COVID-19 proved a test for professional service firms, those that demonstrated resilience in adapting their services and business models to the rapidly changing market conditions are best positioned to attract buyers and investors moving forwards.

Gerald Edelman has released its latest industry report, which provides a review of the professional services industry. This report focuses on key industry trends that are shaping the landscape of the market, M&A activity, threats to the sector, and an overall outlook for the coming years.

Key takeaways from the report are: 

• M&A appetite for robust opportunities remains high. A survey of buyers and investors in professional services provided key insights, including 91% of PE buyers expecting to maintain or increase their level of M&A activity.
• Demand for accounting services is sufficiently high, with increased demand from clients for mid-tier accounting firms to provide a greater breadth of professional services.
• While demand for transactional legal services has been significantly reduced by COVID-19, countercyclical practise areas such as litigation and insolvency have benefited from economic disruption, softening COVID-19’s overall impact on the legal market.
• A Mckinsey & Co. study concluded that COVID-19 has, on average, accelerated digital transformation for businesses by seven years. A 2021 survey of strategic and private equity buyers found the largest motivator of M&A for professional service firms was to acquire digital technologies and advisory capabilities enabling them to serve digitally or advise these technologies.

Nick Wallis, Partner of Gerald Edelman Deal Advisory, stated, “As a business, we are continually looking for new ways to provide business owners and investors with key insights into their sectors. M&A activity within professional services is expected to increase, driven by firms wanting to acquire new service capabilities or expand geographically…A wave of consolidation is anticipated across the industry, with larger players acquiring smaller players and smaller players using acquisitions to scale.”