The phenomenon of M&A in professional services: whether corporate services, law or accounting, might appear to directly correlate with private equity’s interest in these markets. It is true – but only to an extent.
Private equity is the symptom, rather than the cause, of dealmaking.
For example, what has been seen in the Asia-Pacific corporate services market in recent years is a move to expand across borders. Because the majority of the markets in Asia are not huge as standalone jurisdictions, end-clients look quickly to build their offering in neighbouring or key countries to deliver services to their clients.
As such, the corporate services providers that look to support these clients have a choice: they either follow their clients across these borders or remain at risk of losing them to a provider that has a multi-jurisdictional offering.
This has been occurring for years in the Asia-Pacific region but is only now happening in Europe. There are a number of reasons.
Firstly, local European markets are bigger, which means clients can make larger gains without having to cross borders. As such, there’s been less impetus for corporate services and accountancy providers to expand outside of their country.
Secondly, where there is a requirement for cross-border services, associations and network membership has helped to fill gaps – which has traditionally lowered the need for cross-border M&A or for professional service firms to set up in multiple European markets.
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