For much of the past decade, professional services appeared to offer one of the most compelling consolidation opportunities in the economy. Across accounting, legal services, wealth management, engineering consulting, and numerous specialist advisory sectors, investors encountered industries that remained remarkably fragmented despite decades of broader corporate consolidation. Thousands of firms operated with recurring revenues, loyal client relationships, and relatively predictable demand. At the same time, many faced rising technology costs, increasing regulatory complexity, growing cybersecurity requirements, and succession challenges among aging partners. What had historically been viewed as collections of independent professional practices increasingly started looking like fragmented markets waiting to be consolidated.
The logic appeared straightforward. Acquire firms. Build scale. Centralize infrastructure. Standardize operations. Spread technology investment across larger revenue bases. Create institutions capable of generating enterprise value beyond the economics of the individual firms themselves. In accounting, firms such as Xeinadin and Sumer emerged as visible examples of this broader ambition. Similar strategies appeared across wealth management, legal services, healthcare, veterinary services, and a growing range of other relationship-driven sectors. Fragmentation increasingly came to be viewed as inefficiency. Scale increasingly came to be viewed as the solution. (Xeinadin – Our Heritage; Penta Capital – Sumer; Accountancy Europe – Private equity investments in accountancy firms; IFAC – Private Equity Investment in Accountancy)
For several years, the model appeared to work. Acquisitions accumulated rapidly. Revenue expanded. Platforms grew. New capital continued entering the sector. Yet beneath the growth story sat a question that attracted surprisingly little attention. Consolidation models typically focus on revenue, costs, integration, technology, and valuation. They rarely focus on trust. But professional-services firms were never merely collections of revenue streams. They were institutional trust systems built around relationships, reputation, local credibility, and accumulated client confidence developed over decades. The hidden assumption behind many roll-ups may therefore have been far simpler than any acquisition model suggested: that institutional trust can gradually migrate from local firms to the platform itself.
The Hidden Assumption
This assumption rarely appears explicitly in investor presentations, acquisition announcements, or integration plans. Yet the economics of consolidation depend on it almost entirely. Buyers are not ultimately purchasing collections of local firms. They are purchasing the expectation that those firms can eventually become something larger than the sum of their individual parts. Scale alone is rarely sufficient. The real objective is transferability. A platform becomes valuable when clients, employees, partners, and future investors increasingly attach their confidence to the institution itself rather than to the specific firms that originally joined it.
The challenge is that trust behaves differently from revenue. Revenue can be acquired immediately. Headcount can be acquired immediately. Offices can be acquired immediately. Trust often cannot. In many professional-services firms, client relationships remain deeply connected to local partners, local teams, and local reputations long after ownership has changed. From a legal perspective, the acquisition may be complete. From an institutional perspective, integration may only be beginning. The platform may own the business while the underlying trust relationships continue to reside somewhere else entirely.
This distinction becomes especially important when consolidation moves beyond acquisition and enters integration. During the early growth phase, local autonomy often remains commercially useful. Existing brands continue operating. Client relationships remain stable. Partners retain influence. Cultural disruption remains limited. The platform appears to grow rapidly while avoiding significant resistance. Yet the very mechanisms that make acquisitions easier may simultaneously slow the migration of trust toward the institution itself. The organization becomes larger, but whether it becomes more transferable remains an open question.
The Platform Test
This creates a problem for boards and investors because many of the metrics traditionally used to evaluate consolidation may be measuring the wrong thing. Revenue growth can result from acquisitions. Headcount growth can result from acquisitions. Geographic expansion can result from acquisitions. Even profitability improvements can result from procurement savings, cost reductions, and operational leverage. None of these outcomes necessarily demonstrate that institutional trust has migrated from local firms to the platform.
The more revealing questions are often less visible. Would clients remain if key local partners departed? Would employees identify more strongly with the platform than with the acquired firm they originally joined? Would future buyers believe they were acquiring a coherent institution or merely a collection of businesses operating underneath a common ownership structure? These questions are significantly harder to quantify. Yet they may ultimately prove more important than many of the operational metrics that dominate integration reporting.
Economic compatibility may prove equally important. Professional-services firms often explain successful integrations through governance, leadership, and culture. Yet underlying economics may matter more than many observers assume. Firms with similar partner economics, business mixes, and incentive structures often find integration easier because decision-making, investment priorities, and growth objectives already align. Firms with materially different economic systems may struggle to create institutional coherence even when governance structures appear similar. Transferability therefore depends not only on integration effort, but also on the degree of economic compatibility between the organizations being combined.
Recent developments inside accounting may offer early indications of this dynamic. Xeinadin’s reported sale process failed to achieve the valuation its owners sought. Sumer’s owners reportedly paused a potential sale while evaluating alternative ownership structures. Neither development should automatically be interpreted as failure. Both organizations built substantial scale and significant market positions. Yet they raise a more interesting possibility. Acquisition may be the easier part. Demonstrating that the institution underneath has become sufficiently coherent and transferable to justify platform-level valuations may prove considerably harder. This question may become even more important in the coming decade as the economics of professional services continue to evolve. (Financial Times – Private equity group’s £1bn sale of UK accounting firm collapses; Accountancy Age – Why the Xeinadin auction collapse is a reality check for the mid-tier; Financial Times – Ex-KPMG executive targets £1bn valuation for his own accounting firm; International Accounting Bulletin – Penta Capital Partners pauses Sumer sale plans; City A.M. – Ex-KPMG led accounting giant stalls £1bn sale)
Why AI Changes the Equation
This challenge is becoming more important rather than less important because the economics of professional services are increasingly shifting toward infrastructure. Artificial intelligence, cybersecurity, workflow orchestration, compliance technology, data governance, and centralized operating environments require levels of investment that many smaller firms struggle to fund independently. This remains one of the strongest structural arguments supporting consolidation. Larger platforms can spread infrastructure costs across broader revenue bases while building capabilities individual firms would find difficult to replicate alone.
Yet the same technologies that strengthen the economic argument for scale may simultaneously increase institutional tension. AI systems work best when workflows become standardized. Data environments become integrated. Governance becomes more centralized. Operating models become more consistent. In other words, the future economics of professional services increasingly reward platform behavior. The more firms invest in AI-enabled operating environments, the more pressure emerges for harmonization underneath the surface.
This creates a structural collision. The historical economics of professional services were built around decentralized trust. The emerging economics of professional services increasingly reward centralized infrastructure. One system derives value from local relationships. The other derives value from platform leverage. The challenge facing many consolidators is not choosing between the two. It is discovering whether both can coexist inside the same institution over the long term.
Beyond Roll-Ups
Although accounting currently provides some of the clearest examples, the underlying question extends far beyond a single profession. Wealth-management consolidators increasingly depend on their ability to retain client trust through advisor transitions. Legal-services platforms face similar tensions between local relationships and centralized operating models. Engineering consultancies, specialist advisory firms, healthcare providers, and veterinary groups all confront variations of the same challenge. The sectors differ. The underlying economics often do not.
The question also extends beyond traditional roll-up strategies. Any professional-services organization seeking to centralize governance, scale technology investment, institutionalize client relationships, or introduce external capital eventually confronts a similar issue. Trust may historically reside within local partnerships, offices, or individual professionals. Yet platform economics increasingly require that trust migrate toward the institution itself. The Transferability Problem therefore applies not only to acquisition-led consolidators, but potentially to any professional-services firm attempting to evolve from a collection of relationships into a more integrated institutional platform.
A different example can be seen in Afileon, where private capital entered a regulated professional-services environment without directly acquiring ownership of the underlying profession. Although the structure differs significantly from traditional roll-ups, the underlying question remains similar: can institutional capabilities become sufficiently embedded within the platform to create value that extends beyond the individual firms and professionals that originally generated it?
In each case, investors are attempting to transform organizations built around localized trust into institutions capable of generating platform-level economics. That transformation is not impossible. Numerous professional-services organizations have successfully built highly integrated operating environments over time. The challenge is that integration itself is often measured operationally while trust migrates institutionally. The first process can sometimes be accelerated through investment and management attention. The second often follows a much slower timetable.
This distinction may help explain why some consolidators eventually evolve into powerful institutions while others remain collections of acquired businesses operating underneath a common ownership structure. The difference is rarely visible immediately after acquisition. It often emerges years later when leadership changes, key individuals depart, ownership transfers occur, or market conditions become more difficult. Those moments reveal whether trust has genuinely migrated to the institution or whether it remains attached to the relationships that originally generated the revenue.
The Transferability Problem
Much of the discussion around private equity in professional services has focused on what I previously described as the Exit Problem. Can investors ultimately sell their stake, refinance the platform, pursue an IPO, or find another buyer willing to acquire the business? The Transferability Problem sits one layer deeper. The Exit Problem asks whether ownership can be transferred. The Transferability Problem asks whether there is a sufficiently coherent institution underneath the ownership structure to transfer in the first place.
The more difficult challenge may emerge later. Eventually, ownership changes. Investors seek exits. Leadership teams evolve. Institutions mature. At that point, buyers are no longer evaluating a growth story. They are evaluating transferability. Can the organization survive ownership transition without disrupting client retention, partner commitment, employee engagement, and operational continuity? Does the institution possess sufficient coherence to function independently from the individuals and firms that originally created it?
This may explain why transferability increasingly sits at the center of many professional-services transactions. A platform valuation ultimately assumes that future owners are acquiring something durable. Not merely a collection of contracts. Not merely a collection of offices. Not merely a collection of acquired firms. They are acquiring an institution capable of surviving successive ownership transitions while preserving the trust structures on which its economics depend. That is a significantly higher standard than simply demonstrating acquisition-led growth.
Closing Thoughts
For years, fragmentation was treated as the central problem facing many professional-services sectors. Smaller firms appeared subscale. Local operating models appeared inefficient. Independent partnerships appeared increasingly difficult to sustain in a world demanding larger technology investments, stronger cybersecurity capabilities, more sophisticated compliance infrastructures, and growing AI-related expenditure. Consolidation therefore appeared to offer a natural solution. Scale would solve what fragmentation could not.
Yet fragmentation may not simply have represented inefficiency waiting to be eliminated. In many cases, it may have represented the institutional architecture through which trust, accountability, reputation, and client confidence were distributed throughout the profession. Those characteristics often made firms commercially attractive in the first place. They also make them considerably more difficult to transform into transferable platform institutions than many consolidation models originally assumed.
The deeper implication extends far beyond accounting, legal services, or any individual profession. Professional-services firms increasingly face the same underlying question. Can institutions built historically around local trust, partner autonomy, and fragmented governance evolve into scalable operating platforms without losing the very characteristics that made them valuable? The future winners may not be the organizations that consolidate the fastest or acquire the largest number of firms. They may be the organizations most capable of transforming localized trust into transferable institutional value. Ownership can be consolidated relatively quickly. Building an institution capable of surviving the transfer of ownership is a far more difficult challenge.
This distinction may help explain why the economics of entering professional services often appear more straightforward than the economics of exiting them, a theme explored further in The Exit Problem.
What This Means for Boards
Boards should increasingly view consolidation as an institutional transformation challenge rather than a conventional M&A exercise. The acquisition itself is often the most visible milestone, but it may be among the least difficult parts of the process. The harder task begins afterward. Systems must be integrated. Governance structures must evolve. Operating models must be harmonized. Talent must be retained. Cultures must adapt. Most importantly, trust must gradually migrate from local entities to the broader institution without destabilizing the relationships that continue generating economic value.
This changes the questions boards should ask. Rather than focusing exclusively on acquisition volume, revenue growth, or synergy realization, boards should increasingly evaluate whether a coherent institution is actually emerging underneath the acquisition story. Is the platform becoming stronger than its constituent parts? Are clients increasingly identifying with the institution? Are employees developing loyalty to the platform itself? Would the organization remain resilient if key individuals departed tomorrow?
The answers to these questions may ultimately matter more than many traditional integration metrics. Revenue can be purchased. Infrastructure can be built. Technology can be deployed. Institutional trust follows different rules. It develops gradually, often invisibly, and cannot simply be mandated through governance structures or ownership changes. Yet it remains one of the most important economic assets professional-services firms possess.
I work with boards and executive teams on independent perspectives related to professional-services transformation, governance, operating models, platform economics, and the changing economics of professional-services firms.
If your leadership team is working through similar questions around ownership structures, governance alignment, investment pressure, or operating-model evolution, you may find my Future of Professional Services board sessions and Transformation Reality Review valuable. Feel free to reach out.
Sources
Primary Sources
Financial Times – Private equity group’s £1bn sale of UK accounting firm collapses
Financial Times – Ex-KPMG executive targets £1bn valuation for his own accounting firm
Accountancy Europe – Private equity investments in accountancy firms
IFAC – Private Equity Investment in Accountancy
International Accounting Bulletin – Penta Capital Partners pauses Sumer sale plans
City A.M. – Ex-KPMG led accounting giant stalls £1bn sale
Accountancy Age – Ex-KPMG COO eyes £1bn valuation for his own accountancy firm
Accountancy Age – Why the Xeinadin auction collapse is a reality check for the mid-tier
Thomson Reuters Institute – Private equity is rewriting the rules for tax, audit & accounting firms