Shifting regulatory environment driving compliance services M&A

Findings from a 2025 CBI survey revealed that 38% of surveyed UK firms reported a significant increase in regulatory burden over the past five years.

Despite recent government initiatives to reduce this burden, regulations are expected to continue to tighten and change. The CBI found that several larger businesses are incurring compliance costs of up to £50 million a year.

It is no surprise then that firms are moving towards contracting out this workload to dedicated compliance services companies, who are able to deal with the process more efficiently. This is resulting in a significant M&A appetite for the consultancy firms that specialise in the delivery of compliance-related services. Highly regulated sectors including construction, financial services, legal, tech and manufacturing are experiencing especially strong demand for compliance services, leading to commensurate demand for these providers as acquisition targets.

This trend mirrors – and is in many ways connected to – the growing demand for consultancy services in general (6.4% growth in 2025, 8.7% in 2026) and the subsequent upswing in consultancy M&A. The key takeaway being that, in an increasingly complex, challenging and shifting business environment, services that enable businesses to stay abreast of regulations, geopolitical and economic headwinds and unexpected market shifts are in high demand, as are the companies that provide these services.

Let’s examine the key trends that are driving growing demand for compliance services and look at how this is leading to M&A activity in a number of diverse sectors that are nonetheless linked by their strict regulatory environments.

What’s behind the growing demand for compliance services?

Businesses face an increasingly complex regulatory environment and furthermore one that is regularly shifting. This is a trend that has accelerated over recent years, driven by new reporting obligations, compliance with Brexit rule changes, and the adoption of more stringent corporate transparency and economic crime measures.

An environment of heightened regulation has seen standards significantly tightened in areas such as anti-financial crime, data protection, ESG and consumer protection, while, for UK companies in particular, the country’s divergence from the EU post-Brexit has resulted in the evolution of UK specific rules.

New UK rules have included legislation such as the Consumer Duty in financial services, as well as new requirements governing factors such as sustainability, operational resilience, crisis management and tech.

Tech, in and of itself, is driving significant demand for compliance services, as businesses in certain sectors are required to demonstrate compliance with data privacy rules and, in some cases, cybersecurity standards.

Of course, we can’t talk about tech regulation without mentioning the major elephant in the room: AI. Artificial intelligence is now virtually ubiquitous across many industries and this is only likely to increase amid greater uptake and further technological development.

However, the UK still lacks a clear regulatory framework governing the use of AI and the government announced earlier this year that planned regulations would be delayed by at least a year in order to ensure more comprehensive and effective legislation.

This means that there remains a huge degree of uncertainty about what AI regulations will look like, with options ranging from an AI-friendly, light-touch approach, to a far more strict and wide-ranging regulatory framework that is more in line with the EU’s standards.

No doubt, in the face of such uncertainty, many companies that use AI (whether occasionally or as an integral part of their business) will be seeking advice from experts in order to assess the likely outcome and the options available to them.

Aside from tech, the other area arguably generating the greatest need for compliance services is ESG (environmental, social and governance), with companies in many sectors increasingly required to undertake significant environmental reporting.

ESG regulation also extends to areas such as supply chain transparency, social responsibility and sustainable finance. As a result, businesses with a significant ESG reporting burden need support managing areas such as ESG disclosure, verifying their green credentials, supply chain management and audit and sustainable finance requirements.

Globalisation is also a factor (especially post-Brexit), with companies seeking to operate internationally or that have global supply chains being required to navigate numerous differing regulatory regimes. This is driving a need for expertise and solutions related to cross-border compliance.

Not only are there more regulations and increasingly complex rules to follow, but enforcement is becoming stricter and, often, the penalties for non-compliance more severe. This means that businesses operating in highly regulated industries, particularly those where regulations relate to financial crime prevention, data security and consumer protection, have more to lose, and are more likely to be caught out, if they fail to be compliant.

Naturally, this heightened risk means that demand for robust compliance consultancy, monitoring and advice will increase exponentially.

Another reason for compliance services being in such high demand is the simple fact that regulations are constantly changing, meaning that businesses need to remain agile and stay abreast of the latest developments in order to adjust accordingly.

A salient recent example of this was the announcement of new regulations around late payments of invoices. Under the proposed new rules, there will be a mandatory minimum payment of 60 days, which will at some point be cut to 45 days.

The Small Business Commissioner will also be granted powers enabling them to conduct spot checks and impose major fines on businesses that are persistently late in making payments to suppliers.

Finally, there is the issue of consumer awareness and expectation. We live in an era of almost unparalleled information sharing, meaning that businesses that do not comply with regulations can often expect to face major public scrutiny.

Meanwhile, consumer expectations are also becoming more demanding. Consumers increasingly expect businesses (and not just the companies whose services or products they directly use) to reflect their own values and to meet certain standards. If companies are found to be non-compliant with regulations (for example, environmental standards), then they run a serious risk of reputational damage and lost business.

The question board directors and upper level management need to be asking is whether they want to build and grow an internal department to deal with regulatory compliance, or would it be more efficient to outsource the processes, leaving the company to focus on its core activities.

The key sectors

Some degree of regulation is present in every industry, even if the guidelines that businesses have to comply with are minimal, scrutiny not too intrusive and penalties or punishments not particularly severe.

However, even compiling a list of heavily regulated industries would be a thankless job, given the copious amounts of rules, regulations and general red tape that businesses in so many industries have to contend with.

Below, we examine three key industries that are not only extremely heavily regulated, but are undergoing a rapid rate of change, have an unpredictable, shifting regulatory environment and in which compliance is such a prominent concern that it plays a major role in M&A.

Financial Services

The financial services sector is one of the most highly-regulated industries in the United Kingdom, with incredibly high compliance standards aimed at protecting consumers, promoting financial stability, ensuring market integrity and maintaining and building the UK’s reputation as a global financial hub.

Comprehensive oversight is provided by a number of different authorities, including the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA) and the Bank of England. The FCA and the PRA, in particular, set stringent standards regarding consumer protection, prevention of financial crime and prudential regulation, with the regulatory framework covering banks, capital markets, asset managers, payment providers, insurers and companies from a range of other sub-sectors.

Scrutiny is intense, with many firms – especially major institutions – required to demonstrate strong governance, effective risk management and capabilities to deliver fair outcomes for consumers. Enforcement is similarly stringent, with breaches involving financial crime, customer harm and misconduct being met with significant fines and interventions.

Furthermore, amid the growing emergence of new risks (e.g. cyber attacks, AI and climate change), as well the need to promote competitiveness and growth, new regulations and regulatory changes are common.

Analysing the current regulatory environment, law firm Skadden said that there is “an enormous amount of regulatory work in the pipeline for 2025 and 2026” adding that companies across the sector “should ensure they have reviewed the regulators’ strategy and plans and update their own horizon-scanning initiatives to reflect expectations.”

Unsurprisingly, such a complex, shifting regulatory landscape drives major demand for compliance services, extending to significant levels of M&A activity involving companies acquiring compliance capabilities and expertise.

Areas such as compliance solutions, regulatory technology (RegTech), audit services and risk management have seen considerable dealmaking. Financial institutions and other firms have used M&A to add digital compliance tools, expertise in specific areas of regulation (e.g. ESG reporting, data protection, anti money laundering) and to embed a more robust compliance culture.

M&A allows companies to acquire these capabilities swiftly, rather than develop them internally, which could prove incredibly costly in terms of both time and resources. This is clearly advantageous in such a rapidly shifting environment and enables companies to remain compliant, resilient and operationally prepared.

As demand for these services increases, several of the larger compliance services firms are expanding their market share by making acquisitions of their own, with deals enabling them to offer more comprehensive services, expand geographically and grow their customer base.

In June 2025, UK RegTech firm Cube announced the acquisition of AI-powered risk management data platform Acin. Founded in 2018, London-based Acin developed a platform that enables financial institutions to digitise operational and non-financial risk analysis.

The acquisition significantly enhances Cube’s service offering, with the company saying in a statement that it provided “mapping between regulations and controls”, additional industry benchmarking and data insights, as well as “traceability across first and second lines of defence”.

The deal continued a period of significant M&A activity for Cube, following its 2023 acquisition of AI-driven regulatory data solutions provider The Hub and its 2024 takeover of Thomson Reuters’ global regulatory intelligence enterprises.

Infrastructure & Construction
Infrastructure and construction is another highly-regulated sector that is going through a period of regulatory change. Overall, the sector is subject to one of the UK’s strictest regulatory frameworks, covered by a comprehensive range of laws, regulations and standards.

Health and safety is at the core of regulation in the industry, both during the construction phase of buildings, and in terms of how they are planned for the people who will ultimately live, work and use the buildings.

Safety regulations include the Health and Safety at Work Act 1974, Construction (Design and Management) Regulations (CDM) and a wide range of other industry-specific standards. Regulations around health and safety in construction and infrastructure have tightened since the Grenfell Tower tragedy in 2017.

This has impacted not just new buildings, but is also leading to tighter standards around retrofitting existing buildings to ensure that aspects such as cladding, fire doors, smoke alarms and fire suppression systems are safe and in line with regulations. This has also added a further compliance burden to existing standards on products and materials, such as CE/UKCA marking and product certification.

Even prior to construction starting, operators face significant regulations around building standards and planning, as well as labour and procurement rules covering factors such as modern slavery prevention, fair employment and corporate social responsibility.

This tough, and increasingly stringent, regulatory environment (which of course extends beyond the few examples cited above) has led to numerous companies across infrastructure and construction using M&A to improve their compliance.

Buyers have targeted firms offering expertise in health and safety consultancy, environmental compliance, building certification and regulatory technology solutions. Again, this enables them to rapidly add capabilities and expertise that instantly bolster their compliance offering.

Premier Technical Services Group (PTSG) is a Castleford-based provider of specialist services to the construction and facilities management industries. The group has a wide range of divisions covering areas including electrical testing, compliance and safety and lightning protection.

In June of this year, the company expanded its electrical compliance and safety testing business through the acquisition of Leeds-based UK Safety Management (UKSM). The deal, intended as a complementary addition to the group’s Electrical Services division, adds significant expertise in fixed wire testing, portable appliance testing (PAT), emergency lighting inspections and fire extinguisher maintenance.

PTSG Group Chairman Paul Teasdale said that UKSM’s “reputation, reach and technical expertise are well aligned with our mission to set the standard in specialist services nationwide.”

Teasdale added that the deal enhances the group’s ability “to deliver outstanding electrical compliance solutions”, as well as scaling its operations and accelerating its strategic growth trajectory.

Renewables & Energy Transition
ESG is now a core consideration for businesses across virtually all sectors, as well as for investors such as private equity firms, and this is largely the result of the push towards renewables, sustainability and net zero.

The breadth of the sustainability and environmental services industry, and the pace at which has developed and grown in recent years, has resulted in a highly regulated industry, as well as one that is seeing a rapid rate of regulatory change.

In renewable energy, projects are required to undergo rigorous environmental impact assessments and obtain an array of permits, as well as needing to comply with rules relating to land use and wildlife.

There are also stringent requirements governing the connection of renewable energy sources to the electricity grid, ranging from technical standards and system balancing to operational reporting, with these standards regulated by bodies including Ofgem and the National Grid.

More broadly, companies must adhere to UK (and potentially EU) sustainability disclosure requirements, carbon accounting standards and supply chain transparency regulations. ESG compliance is needed, not just for regulatory approval, but also for access to green finance and subsidies.

As the UK formally takes steps to achieve net zero by 2050, there is fast-paced policy development and a regulatory burden that is constantly increasing. Recent developments include new requirements relating to supply chain due diligence and biodiversity.

As with AI and other rapid technological developments, this pace of change also ensures that companies face significant uncertainty over the shape that new regulations might take, what they might cover and when they might come into effect.

Unsurprisingly, M&A has emerged as perhaps the most efficient way for companies both to respond to the shifting environment and to capitalise on this environment and the uncertainty that it creates.

Specialist consultancies, companies with advanced ESG reporting capabilities, sustainability-focused digital platforms – the breadth of companies providing compliance-related services in the sector is huge and M&A appetite for them is strong.

Buyers in the sector have targeted deals for a wide range of reasons, from acquiring regulatory expertise and building an end-to-end sustainability offering to risk management, digital compliance and preparation for regulatory changes.

Sureserve Group is an energy and compliance services provider that, over recent years, has made significant efforts to establish itself as a key partner to the UK’s renewables sector. These efforts received a major boost in May 2025, when the group announced the acquisition of net zero strategy, design and programme management specialist HI Group.

Nottinghamshire-based HI Group is a managed service provider, serving as a lead consultant for businesses embarking on drives towards net zero and providing support for transitions towards low-carbon operation.

The company has a strong presence in the commercial estate sector, working across an array of property portfolios, and also has a focused expertise in the further education sector.

Sureserve Group Chief Executive Graham Levinsohn said that the deal aligned with the group’s mission of being “the trusted partner of choice to the public sector in delivering essential and affordable heating, energy savings and compliance solutions as we continue to play a key and progressive role in decarbonisation.”

PE attracted as demand soars
As previously mentioned, demand for compliance services is on a steep upward trajectory and there is no indication that this is going to change at any point in the near-term, or even medium-to-long-term.

As a loosely defined industry, compliance services is extremely broad, with a wide array of companies offering a diverse range of services. These companies often operate in rapidly-developing, highly-fragmented and highly-profitable verticals.

Naturally, compliance has become an area seeing major interest from private equity investors, attracted by the significant growth opportunities, rising demand for services, numerous tailwinds and reliable earnings on offer.

This is something that has acted as a further driver for M&A activity, with many of the most acquisitive companies within compliance services being private equity-backed platform businesses. Some are industry incumbents that have been building through M&A for years, others are companies from emerging industries and sub-sectors that have only recently secured backing.

Whoever the buyer is, though, it seems certain that compliance services M&A is going to be heavily influenced by private equity investment over the coming years, particularly in the light of a growing investment focus on areas such as ESG.

Founded in 2023, Celnor is a group offering wide-ranging testing, inspection, certification and compliance (TICC) services for commercial clients throughout the UK. The company, which is backed by Inflexion Private Equity, has completed more than 20 acquisitions over the past two years.

The company casts a broad net, targeting companies in the UK, Europe and North America that provide testing, analysis, certification, or compliance related services and have annual profits of between £250,000 and £10 million.

Among the group’s acquisitions was its September 2024 takeover of ecological survey provider Arbtech. Founded in 2005, North West-based Arbtech provides services including biodiversity surveys, bat surveys and tree surveys.

Explaining the impetus behind the acquisition, KPMG Corporate Finance’s Rick Stark, who advised on the deal, said: “Arbtech provides mission critical, timely environmental services which are unblocking challenges facing the UK housing market.”

“This includes a Biodioversity Net Gain proposition which has grown significantly on the back of the newly mandatory regulatory requirements. This deal is another example of the current demand for businesses which can demonstrate themselves as platforms in fragmented and emerging markets.”

Conclusion
The sectors outlined in the piece are just a snapshot of a far wider regulatory environment and give only the merest hint of the significant, and regularly shifting, compliance burden that companies of all sizes face in a growing number of industries.

Against this backdrop, it’s clear that demand for compliance-related services will not be diminishing anytime soon. As such, businesses operating in highly-regulated sectors can be expected to use M&A to bolster their compliance capabilities, while compliance providers themselves will seek to capitalise on soaring demand and build scale, geographic presence and market share through acquisitions.

This will also increasingly attract external investment, fuelling yet more M&A activity in what remains a highly diverse, highly fragmented and constantly evolving industry.

Here is a selection of smaller compliance-related businesses currently for sale (as of September 2025):

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