MHA PLC moves towards London AIM listing with £125m fundraise amid FRC investigation

MHA PLC, a UK-based professional services firm, has unveiled plans to list on the London AIM market, seeking to raise up to £125 million. The move is expected to accelerate the company’s growth, bolster its acquisition strategy, and enhance its technological capabilities. However, the announcement comes at a time when the Financial Reporting Council (FRC) has launched an investigation into MHA’s audit of the now-defunct construction firm ISG for the year ending December 2022, a factor that could influence investor sentiment.

Why Is MHA Going Public Now?

MHA’s leadership has framed the decision to pursue a public listing as part of a long-term strategy to solidify its position within the competitive professional services market. By securing capital through its AIM listing, the firm aims to support a broader expansion plan that includes organic growth, strategic acquisitions, and investments in emerging technologies.

Founded in 1869, MHA has evolved into one of the fastest-growing accountancy firms in the UK. It is the UK and Ireland’s independent member of the Baker Tilly International Network, a global affiliation of accounting and business advisory firms spanning over 140 countries. With a workforce of more than 1,800 employees and 160 partners, MHA operates 23 offices across the UK, Ireland, and the Cayman Islands, serving businesses across a wide range of industries.

Listing on AIM is expected to provide MHA with enhanced financial flexibility, increase its visibility in the industry, and allow it to attract high-calibre talent. Additionally, a public listing enables the firm to offer equity participation to future partners, a strategic move aimed at retaining top professionals in a highly competitive sector.

How Does MHA Generate Its Revenue?

MHA’s business model is structured around four core divisions, each playing a crucial role in driving the company’s financial performance.

Audit and Assurance represents the largest revenue stream, accounting for approximately 52% of total income in FY24. This division focuses on external audits, financial reporting, governance, risk management, and compliance services. The company has built a strong reputation among small and medium-sized enterprises (SMEs) and publicly listed firms seeking high-quality assurance services.

The Tax division, which contributed 19% of revenue in FY24, provides domestic and international tax advisory services to businesses and individuals. This segment has gained importance as regulatory changes and evolving tax laws require expert guidance.

Accounting and Business Advisory contributes 27% of MHA’s revenue, offering services such as corporate finance, restructuring, forensic accounting, payroll management, and cloud accounting solutions. Demand for advisory services has increased in recent years, driven by businesses seeking to optimise financial performance and navigate regulatory complexities.

The Wealth Management division, which was formally established in its current structure following the acquisition of Cave & Sons in 2022, contributed 2% of total revenue. The division saw further expansion in April 2024 with the acquisition of Moore and Smalley, adding niche wealth management expertise to MHA’s portfolio.

How Has MHA Expanded Through Acquisitions?

MHA has pursued an aggressive mergers and acquisitions strategy, allowing it to rapidly scale its operations. The acquisition of Moore and Smalley in 2024 marked the firm’s largest deal to date, bringing in £30.4 million in annual revenue and integrating 400 new employees.

The firm’s leadership views the fragmented UK accountancy sector as a fertile ground for consolidation, with numerous mid-sized firms seeking to align with larger organisations to gain scale and resources. MHA has also explored cross-border acquisitions, including potential deals within the Baker Tilly International Network.

Regulatory trends have played a key role in shaping MHA’s expansion strategy. The increased complexity of financial reporting standards and auditing requirements has created opportunities for well-positioned firms to gain market share. Over the past five years, the firm’s top 10 clients have seen a 224% increase in average fees, reflecting the growing demand for compliance and risk management services.

How Will MHA Use the IPO Proceeds?

The net proceeds from MHA’s AIM listing will be allocated across three primary areas: technology investment, talent acquisition, and further mergers and acquisitions. The firm intends to enhance its capabilities in artificial intelligence (AI) and data analytics to drive efficiencies in financial reporting and compliance processes. Investments in technology are expected to improve operational performance while enabling MHA to offer more sophisticated advisory services.

Additionally, a portion of the funds will be used to repay loan notes held by 19 retiring capital partners, as well as certain continuing partners who are reducing their equity stakes.

A separate retail share offering will be conducted alongside the institutional placement, allowing individual investors to participate in the public offering. A formal announcement on the retail offering details is expected in the coming weeks.

What Impact Will the FRC Investigation Have on MHA’s IPO?

The ongoing FRC investigation into MHA’s audit of ISG has introduced an element of uncertainty ahead of the firm’s stock market debut. The FRC, the UK’s accounting regulator, has been increasing its scrutiny of audit firms following several high-profile corporate collapses linked to inadequate financial oversight.

While MHA has stated its commitment to maintaining high audit standards, the investigation raises questions about potential regulatory risks. Investor sentiment is likely to be influenced by the outcome of the probe, as any adverse findings could affect MHA’s reputation and market valuation.

Financial analysts suggest that while MHA’s growth prospects remain strong, investors should closely monitor developments related to the FRC inquiry. The extent to which the investigation impacts the IPO will depend on its findings and whether they lead to any enforcement actions or reputational damage.

Should Investors Consider Buying MHA Shares?

MHA’s AIM listing presents both opportunities and risks for investors. On the positive side, the firm has demonstrated consistent revenue growth, reporting a compound annual growth rate (CAGR) of 13.7% over the past decade. The firm’s high recurring revenue—87% in FY24—adds an element of financial stability.

However, potential investors must also consider the regulatory landscape and the implications of the FRC investigation. While MHA’s leadership remains confident in its market position and long-term strategy, regulatory risks could influence its valuation and post-IPO performance.

Investor interest in professional services firms has been strong in recent years, driven by demand for expertise in audit, tax, and advisory services. However, the broader market environment, including economic conditions and regulatory developments, will play a crucial role in shaping MHA’s post-listing trajectory.

What Comes Next for MHA?

MHA has appointed Cavendish Capital Markets as its nominated adviser, bookrunner, and broker for the listing process. The firm is expected to provide additional details on the retail offer in the coming weeks, with AIM admission anticipated shortly thereafter.

As MHA moves forward with its IPO, market observers will be watching closely to see how the firm navigates the challenges posed by regulatory scrutiny while capitalising on opportunities within the professional services sector. The AIM listing represents a significant milestone in MHA’s evolution, and its success will depend on its ability to maintain strong financial performance while addressing investor concerns surrounding the FRC investigation.