European professional services firms and consultancies could see an uptick in dealmaking as interest rates continue to fall throughout 2025.

When debt prices rise, as they did in the eurozone between July 2022 and September 2023, many corporates begin to frame consultancy fees and B2B services as nice-to-have options rather than must-have essentials, hurting revenues in the sector.

However, the European Central Bank (ECB) has cut interest rates twice this year, with the latest decision coming earlier this month on the back of a previous cut in June. More quarter-point cuts are expected next year. The Bank of England is on a similar path in the UK.

As a result of the increasingly benign backdrop, vendors of professional services firms are likely to feel more relaxed about selling. Some deals are already coming through in anticipation of increasingly lower debt costs in the future.

M&A volumes in European professional services, including consultancies, fell by 54% to EUR 6.2bn in 2024, according to Mergermarket data. Meanwhile, in the year to date (YTD), the volumes decreased by 41% in 2024 compared to YTD23.

However, there have been two large sponsor-backed deals already since the ECB began a new cycle of rates on 4 June. One was the GBP 626m (EUR 746m) acquisition of Alpha Financial Markets Consulting by Bridgepoint Advisers in late June; and the other was Carlyle’s [NASDAQ:CG] EUR 600m purchase of a 60% stake in Seidor in August. Seidor announced an acquisition the following month.

COVID impact

M&A in the sector tends to be bumpy. It spiked in 2017, with volumes of EUR 16.6bn across 702 deals. Activity jumped again in 2019, with EUR 11.7bn across 697 transactions.

Activity was particularly frantic during the COVID-19 pandemic, when providers of professional services were thrust into the limelight as corporate clients struggled to cope with supply-chain shocks and new working practices. Deal activity set a high watermark in 2021, with EUR 16.7bn spread over 747 deals.

Meanwhile, on the other side of the Atlantic, US-based accounting firms have recently drawn financial sponsor interest. The rationale behind deals is to pool expertise, resources, and client networks, while gaining scale to cope with an ever-evolving regulatory landscape, as reported.

Watchlist

Several European firms have launched or intend to launch post-summer sales to benefit from the strengthening tailwinds, according to Mergermarket intelligence.

Grant Thornton UK has shortlisted its US franchise Grant Thornton LLP and private equity firms EQT and Permira as bidders for a minority stake. The US firm received an investment from New Mountain Capital in March.

Meanwhile, Horizon Capital has mandated Rothschild & Co to explore options including a sale for its UK-based platform portfolio company Dains Accountants. A process could launch in 2025.

Netherlands-based consultancy firm Baker Tilly Netherlands is another company from this industry that has been put up for sale, with Livingstone Partners advising.

With names like Winn Group and AAB Business & Tax Advisory also fielding approaches from advisors, Europe’s professional services market can expect a glut of activity in the months ahead as interest costs fall.