Is private equity the only path for accountancy firms to survive?

As we’ve heard in the M&A diaries podcast, many independent firms are asking a difficult question: “Would our firm survive if we didn’t seek private equity investment?”  For Scott Heath, CEO of DJH group, private equity (PE) was the catalyst that transformed his firm from a small, regional practice into a national player with over 500 employees and $40 million in annual revenue.  But for Scott, private equity wasn’t just about growth—it was a lifeline, the only realistic path for sustainable scaling and adapting to the demands of today’s marketplace. Here, we unpack Scott’s journey with DJH, the reasons why private equity became essential, and what this shift means for the future of independent accountancy practices.

Why traditional accountancy models are struggling to keep up

The accountancy landscape has evolved dramatically, creating new challenges for small and mid-sized practices. As Scott points out, pressures to recruit top talent, keep pace with technological advancements, and meet evolving client expectations have grown exponentially over the past decade. “If you were a partner in a practice, you used to wear multi hats,” Scott explains. “One partner would be responsible for IT, another for compliance, another for recruitment.” But those days, he says, are quickly disappearing. In Scott’s view, the complexities of running a modern practice, where specialisation and scale have become crucial, make it nearly impossible for smaller firms to stay competitive without a robust infrastructure. DJH took a radical step by hiring non-accountant leaders to manage operations, recruitment, marketing, and more. However, as their needs expanded, they realised that organic growth alone would not be enough to fund these ambitions.

The private equity pathway – Why DJH chose private equity for sustainable growth

DJH’s journey with private equity didn’t begin with a specific goal of securing a PE partner. Instead, Scott and his team first explored various growth options. From bringing in new partners to merging with other firms, they considered everything, but each path presented significant financial and operational limitations. Then, as DJH’s overheads increased with each hire, they saw a solution: private equity could enable DJH to access the capital required to scale sustainably and avoid the weight of heavy debt. “Once we started growing, the wheels were in motion, and it was hard to stop,” Scott explains. DJH’s steady rise attracted the attention of private equity firms, and, after an extensive search, they found an ideal partner in Tenzin. For DJH, private equity wasn’t just about funding; it was about finding a collaborator with the right values and vision. By partnering with Tenzin, DJH could continue investing in infrastructure, expanding service lines, and growing their client base—all without draining cash reserves or turning to banks for loans.

How private equity brings value beyond just capital

While capital was crucial, Scott has found that private equity’s benefits extend far beyond funding. With Tenzin, DJH gained access to an expansive network of resources and expertise that wouldn’t have been available otherwise. For instance, Tenzin’s portfolio includes tech-enabled companies, giving DJH unique insights into innovations like automation and data analytics. “They open up a network of people that you would not have been connected to before,” says Scott, “and that’s something that adds real value.” Another benefit was an increased level of governance, which Scott admits he didn’t expect. As a previously owner-managed business, DJH’s leaders often made decisions autonomously. However, with Tenzin, DJH now enjoys a more structured governance model, enhancing efficiency and accountability. For Scott, this support lets DJH’s leadership focus on long-term goals without being bogged down by daily operational challenges.

Addressing fears – How private equity hasn’t changed DJH’s core values

For many firms, the idea of taking on a private equity partner brings up concerns about losing control over company culture and values. Scott acknowledges that this fear is common, particularly among small firms that worry about PE’s reputation for prioritising profit over people. However, he emphasises that DJH’s team and clients have seen little change in their day-to-day experience. “There’s a handful of us that have interaction with the private equity partner,” Scott notes, “and that’s because we want to keep our team doing what they do every day that they enjoy.” Scott believes private equity works best when viewed as a “growth partner” rather than an intrusive force. His partnership with Tenzin has proven that PE can indeed support long-term growth without forcing rapid, unsustainable changes. For DJH, maintaining a strong client focus and prioritising team engagement are still paramount—values that Scott insists have only been strengthened since the PE investment.

What private equity brings to the future of accountancy

Private equity is not just about helping firms grow their current operations; it’s also about preparing them for what’s next. Scott is confident that private equity’s influence will be instrumental in keeping firms like DJH competitive as the industry shifts toward AI and digitalization. “AI is here,” he says. “It’s going to be in our industry, and it’s going to help our industry.” By investing in the latest technology, DJH is positioning itself to become more efficient and improve its service offerings to clients. Additionally, DJH’s larger scale, made possible through private equity, allows them to offer comprehensive solutions that smaller firms may struggle to match. Scott points to DJH’s “toolkit,” a suite of group services and cross-functional capabilities that clients can access as needed, including specialist services in R&D tax relief, wills and probate, and HR. This level of flexibility and service diversity, he says, is what sets DJH apart from smaller independent practices.

Is private equity the future of accountancy firms?

Scott Heath’s story at DJH highlights the transformative potential of private equity in today’s accounting sector. For firms looking to grow, innovate, and scale, private equity offers a pathway to unlock resources and expertise that traditional models simply can’t match. However, Scott cautions that it’s essential to find the right partner—one who aligns with the firm’s vision and values and is invested in its success beyond short-term profitability. Scott’s final advice? “If you’re considering a partner, make sure you spend lots of time getting to know them. It’s not just about the deal; it’s about how they align with your culture and how you see the firm operating post-deal.” For DJH, the decision to embrace private equity wasn’t just a strategy for growth—it was a decision to ensure their firm would remain resilient and future-ready in a rapidly changing industry. As the accounting sector continues to evolve, firms that adapt by exploring options like private equity will likely lead the way, embracing innovation and building stronger client relationships along the journey. Private equity might not be the only path forward, but as Scott’s story shows, it’s one with the power to redefine what’s possible for ambitious accountancy firms.