Buying another practice in law, accountancy or advisory is rarely an asset purchase. You are buying a client base, a recurring fee stream and a group of fee-earners who can leave, and almost none of that is something a lender can take a charge over. That single fact decides how far debt will stretch and where you have to bring in equity instead. The question is not "can I borrow to do this deal" but "which slice of the price will a lender fund against future fees, and who carries the risk on the rest."
What private equity changed about the market you're bidding into
For most of the last decade the professional-services consolidation market belonged to a handful of well-funded buyers. Since the Legal Services Act 2007 took effect in 2011 and allowed non-lawyers to own and invest in law firms through an Alternative Business Structure, the SRA has authorised well over a thousand ABS firms, up from around forty in 2012. That opened the door to outside capital. Listed consolidators such as Knights and Gateley have since run long acquisition programmes, and on the accountancy side US and European private equity has taken majority or minority stakes in a large share of the larger firms — by 2024 roughly a fifth of the top sixty UK accountancy firms were private-equity backed, with the UK accounting for the bulk of European PE-backed accountancy deals.
The practical consequence for an independent acquirer is competitive, not abstract. A PE-backed buyer brings committed equity and a leveraged acquisition line and can clear a deal quickly at a full multiple. If you are bidding against that with a single term loan, you will lose on both price and speed unless you structure your funding to behave the same way: a committed source of capital you can draw against each target, not a fresh loan application per deal.
What debt will actually fund in a professional-firm acquisition
Debt funds the part of the price backed by durable, transferable cash generation — and stops where the price depends on goodwill nobody can yet prove will stay. In practice that means a lender sizes a facility against the combined, sustainable fee income of the acquirer and target, tests how much of that income is recurring versus one-off, and lends to a leverage multiple it is comfortable the cash flow covers after partner drawings.
Three things govern how far that goes:
- Recurring versus transactional fees. A book of annual audit, compliance, tax-return or retained-advisory work supports far more debt than a practice whose income is project-based corporate-finance or litigation fees that may not repeat. The underwriter is buying predictability, and prices it accordingly.
- Client and fee-earner retention. The risk in any professional-firm deal is that clients follow a departing partner. Lenders read the partnership or shareholder agreement, restrictive covenants, and the track record of partner promotion before sizing against income that walks if the wrong person leaves.
- The almost-total absence of security. A law or accountancy firm has little a charge can grip — no plant, modest receivables, and a value that is overwhelmingly goodwill. So the facility is underwritten on affordability and cash generation, which is the logic of a cashflow loan, not an asset-backed advance.
For an acquisitive firm doing repeated bolt-ons, the instrument that matches the model is a committed or partially committed acquisition line sized against group recurring fees, drawn down per approved deal, rather than a separate facility negotiated each time. That is what lets an independent move at the pace a PE-backed competitor sets.
Where the deal stops being a debt question
Debt caps out before most consolidation plans are fully funded, for a specific reason: a lender will only advance to a leverage multiple that recurring fees comfortably service, and every bolt-on adds integration and retention risk that tightens the multiple rather than loosens it. The gap between what debt will fund and what the deal costs is where the structuring work really happens, and it usually resolves into two tools the buyer should understand separately.
The first is deferred consideration and earn-out. Sellers of professional firms rarely take all cash on day one, and a buyer should not want them to. Tying a meaningful slice of the price to client and fee retention over two to three years moves the risk that the book transfers onto the person best placed to manage it — the departing seller — and lets the acquired firm's own future cash fund that part of the price. A clean, defensible recurring-revenue analysis from the seller protects their deferred slice; a softer book than claimed is where clawback bites.
The second is genuine outside equity, and it is the right answer in two cases. One is the serial acquirer whose buy-and-build runs beyond the leverage debt will support and who needs growth capital plus headroom — the place for an equity layer that funds the reach debt cannot and shares the consolidation upside. The other is the law firm specifically: taking external investment to fund acquisitions means becoming, or being owned through, an ABS. The SRA's authorisation is deliberately demanding on financial stability and on protecting independent advice, so the equity route in law carries a regulatory application that the accountancy or general-advisory route does not.
How to decide the split before you bid
The mix follows the deal, not a house preference, and the deciding question is which party should carry the retention risk on the fees being bought:
- A single bolt-on of a recurring-fee practice is mostly a debt question. Size a cashflow facility against sustainable group fees, and use deferred consideration to absorb the retention risk rather than paying it all up front.
- A buy-and-build across many deals needs a hybrid. Run senior debt to a conservative leverage multiple, layer equity for the reach beyond it, and let deferred consideration carry the slice of each price that depends on clients staying.
- A law firm taking outside investment has to budget for the ABS route from the start. The equity is available, but the SRA authorisation is part of the timetable, not an afterthought.
Where a freehold office sits inside the target, separate it into its own property finance facility — a lender will advance far more against the building than against the goodwill, which frees acquisition headroom you would otherwise spend. For how acquisition, buy-in and working-capital funding fit together across the sector, see the professional-services sector page.