Advisory firms, where the asset is the people.

The professional services sector spans management and technology consulting, engineering and technical advisory, accounting, legal and other specialist advisory firms, ranging from small partner-led practices through to multinational groups. Despite this variety, most firms share a common economic model, in which revenue is set by the capacity of their people, the proportion of that capacity that is billed, and the rates that are realised on it.

Growth tends to come from a combination of deeper penetration of existing clients, expansion into adjacent services and geographies, and acquisition. Consolidation, frequently supported by private equity investment, has been a feature of the mid-market in recent years, and the value of a combination tends to rest on the retention of key people and client relationships, and on the ability of the merged firm to sell across its broader range of services.

The sector is also among the more exposed to advances in AI, which has the potential to automate a meaningful share of the research, analysis and drafting traditionally performed by junior staff. This is likely to have implications for staffing models and time-based pricing, and may increase the value of proprietary data, methods and client relationships. Our principals have spent much of their careers inside consulting firms, and we bring that perspective to the work we do with clients in the sector.