Professional services firms juggle complexity and capital

In the professional services industry, rapid advances in artificial intelligence, structural expansion and ever-evolving regulation are leading to increased complexity for leaders, specifically around capital generation and allocation. These factors are reshaping how firms compete, deliver value and sustain profitability. For leaders, understanding these trends is essential to navigating an environment where uncertainty is the only constant.

AI and digital acceleration

In recent years, generative AI and automation have transformed knowledge work, enabling significant efficiencies in drafting, research and analysis. However, the pace and effectiveness of AI adoption vary widely among firm sizes and risk appetites. Some organizations have overinvested in fragmented tools without a coherent digital strategy, resulting in limited returns. Others have hesitated, concerned about regulatory and reputational risks.

The firms pulling ahead have integrated AI into a clear firmwide digital strategy—aligning technology with data quality, governance and client outcomes. The next phase of growth will favor those that move beyond internal efficiencies to reimagine roles, teams and even entire service lines.

Increasingly, professional services firms are embracing agentic AI systems that can autonomously plan, execute and adapt workflows with minimal human intervention. These intelligent agents are being integrated into core business processes—such as client onboarding, risk monitoring and document review—enabling firms to scale knowledge, accelerate decision making and deliver consistent quality at unprecedented speed.

However, as firms deploy agentic AI, a new knowledge gap is emerging. Specialized knowledge is needed to maintain these agents, monitor their performance and ensure responsible usage. Firms must invest in upskilling teams and developing robust oversight frameworks to fully realize the benefits of agentic AI while mitigating operational and ethical risks.

The role of private equity

The influx of private equity (PE) capital has accelerated structural changes in professional services, particularly in accounting, consulting and legal services. According to CB Insights, the professional services industry has recorded 78 PE deals since January 2022, with a total deal amount of $1.5 billion, demonstrating sustained investor and strategic acquirer interest in the industry. This substantial deal count reflects the industry's attractiveness as companies seek to enhance capabilities, expand geographically and integrate new technologies like AI. According to PitchBook, deals in professional services in the U.S. and the UK made up 15% of total PE deals in 2014 but have increased steadily to reach 19% so far in 2025.

As a result, many firms that are hesitant to embrace PE are reassessing their traditional structure, with those remaining under traditional partnership models considering converting to corporate entities or alternative business structures to attract investment and support growth.

To keep pace with rapid change and client demands, many professional services firms are acquiring companies that bring specialized skills and innovative service offerings. Professional services firms have pursued over 100 AI agent-related partnerships, investments and acquisitions since 2023, according to CB Insights. These strategic acquisitions not only expand technical capabilities and geographic reach, but also enable firms to deliver more comprehensive solutions and remain competitive in an increasingly complex market.

While PE allows access to capital, this approach also creates concerns such as debt service burden, loss of control and the formulation of the eventual exit strategy.

The impact of AI

The RSM Middle Market AI Survey 2025: U.S. and Canada shows that professional services firms recognize the value of adopting AI into their business practices. Most respondents said they have or are exploring a formal strategy or roadmap for AI adoption .

The survey also shows that firms are taking steps to integrate AI into their organizations.

While these developments enable scale and specialization, they also introduce friction in the form of slower decision making, increased margin pressure and inconsistent client experiences. This rapid growth often outpaces the evolution of internal processes, leading to misalignment between local decisions and overarching strategy. Leaders increasingly view this complexity not just as a challenge, but as a structural reality requiring smarter design and governance. Companies will need to allocate resources to review and amend management and decision-making structures regularly to ensure that they remain fit for the business.

Navigating regulatory changes

An increasingly fragmented regulatory environment is affecting structural complexity. International regulations can differ markedly, and a lack of local expertise can result in costly missteps. Even in established markets, the pace of regulatory change is accelerating, particularly in response to technological innovation.

Most professional services firms, and especially legal and accounting firms, must adhere to multiple, evolving sets of rules and reporting requirements. Ongoing evaluation of these frameworks is vital, especially with regard to AI adoption and data protection. Firms that invest in regulatory intelligence and local advisory relationships are better positioned to avoid pitfalls and capitalize on new opportunities.

Capital discipline in a high-cost environment

All of the above trends require capital and careful consideration of how it is allocated. The cost of capital has risen sharply in recent years, prompting firms to reassess investment priorities. With interest rates over the past few years fluctuating, many firms are exploring PE investment or mergers to achieve economies of scale. With the recent increase in layoffs, many firms are pivoting capital investments toward technology and away from head count. In this way, technology investments now compete with talent initiatives, geographic expansion and acquisition opportunities.

Firms require a clear plan that maps out measurable returns on investment and long-term benefits to the organization. Leaders are scrutinizing return on investment more rigorously, balancing short-term liquidity with long-term transformation. The trend is toward fewer, but more effective, investments—those most closely tied to strategic objectives and measurable outcomes.