Well, I stand corrected. Maybe. 🤔
I sat down with legendary CPA, Scott Showalter (also my former grad school professor) earlier this fall, after I returned from nearly six years in public practice with EY abroad in Australia. We talked a lot about the growing wave of private equity (PE) investments in accounting firms.
He’s right: it’s not just a trend; it’s a seismic shift that's reshaping the profession as we know it.
The Rise of Private Equity in Accounting
High-profile deals like Grant Thornton’s partnership with New Mountain Capital and Baker Tilly’s collaboration with Hellman & Friedman have turned heads in the market. So why are PE firms diving into accounting?
Accounting firms offer something PE loves: stability and scalability. It’s a fragmented industry with recurring, consistent revenues, growth potential, and a landscape prime for advancements in (lacking) technology. It’s the perfect vertical for new, outside investment. 💼
What Does This (Really) Mean for Us?
PE investments bring opportunities—and challenges—for accounting firms and their clients. So here’s what you should know:
1. Better, Faster Service
PE backing means firms can (and should) deliver more efficient services. Think streamlined audits, quicker quality of earnings, and enhanced insights. Good news for clients? For sure. 🚀 Even better news for my fellow auditors and transaction advisors? ABSOLUTELY.
2. Costs-Focus 💸
Let’s not ignore the elephant in the room. PE firms expect returns, and that means changes to pricing, portfolios, staffing, etc. It’s all on the table. Even more difficult in an industry rife with talent shortages. Transparency and planning will be key. It’s about time, right? ⏱️📊
3. A Spotlight on Technology 💡
So how do we actually get there, with talent shortages and this “faster service” thing? Firms have no choice but to double down on automation and data-driven solutions. But think about what’s in your tech stack, strategically. Find tools that actually do the work, not just create incremental, minor efficiencies. Save time, the right way. You shouldn't have to sacrifice quality. Auditing hard is hard enough as it is.
4. Cultural Shifts (i.e. Independence)
This one’s big. Scott reminded me: PE doesn't just want returns. It also looks for exits. Can firms backed by PE maintain audit independence? Or is the game of “hot potato” just getting riskier, as amalgamated practices are potentially passed amongst different owners? Regulators are watching closely, and so should you. Trust is non-negotiable. Never sacrifice your quality, client-centered service 🕵️♂️⚖️
Final Thoughts
To my fellow practitioners - don’t forget we are part of a profession. As Scott said: PE is pushing our industry into a pure-play “business” - rather than allowing it to remain a true “profession.” Remember your north star ⭐ protecting the public interest and our capital markets.
So, does accounting need saving? Maybe. But with the right tools and a focus on independence and quality, it’s more like an evolution than a rescue mission.The PE wave is here. Let’s ride it—together. 🌟🌊
Got questions? Has a PE firm invested in your practice? Let’s talk.
