The PE gold rush in accounting: Is it boom or bust?
Private equity (PE) has ignited a seismic shift in the accounting industry, promising wealth, transformation, and a new way of doing business. But like any gold rush, the glittering opportunities come with risks that every firm needs to weigh carefully. Is this truly the golden age for accounting firms, or are we on the brink of a boom-and-bust cycle?
Want to hear the full conversation? Check out this episode on M&A Diaries, where James interviews Allan Koltin.
Click here.
What’s fuelling the PE frenzy in accounting?
The accounting sector, long considered a steady and predictable field, has become a hotbed of activity thanks to private equity’s entry into the space. So, what’s driving this surge?
• Succession challenges: Many firms face a lack of willing or capable successors as older partners look to retire. Younger professionals often lack the capital—or the desire—to buy into traditional partnership models.
• Talent wars: Recruitment and retention are increasingly difficult, with accountants opting for more dynamic career paths in technology and consulting.
• Regulatory burdens: Heightened compliance requirements are adding operational stress, especially for mid-sized firms.
• Tech disruption: AI and automation are revolutionising the industry, demanding significant investment to stay competitive.
For private equity, these challenges translate to opportunity. They see accounting firms as undervalued assets with the potential for massive growth through technology, streamlined operations, and mergers.
The glittering benefits of PE deals
On the surface, private equity deals appear to be a win-win for accounting firms. Here’s why they’re so appealing:
• Lucrative payouts: PE-backed offers can reach multiples of 10x to 14x earnings, significantly higher than traditional valuations.
• Capital for growth: PE provides the funds to invest in cutting-edge technology, expand service offerings, and attract top talent.
• Infrastructure support: Firms gain access to dedicated HR, marketing, and IT teams, allowing accountants to focus on clients.
• Career opportunities for younger partners: Equity rollover schemes and performance bonuses offer younger professionals a chance to build wealth without the traditional buy-in model.
Behind the hype: The hidden costs of PE ownership
However, not everything that glitters is gold. There are significant downsides to joining the PE rush:
• Loss of autonomy: Firms must align with PE’s profit-driven goals, which can clash with long-standing client-first cultures.
• Pressure to perform: High ROI expectations may lead to cost-cutting, increased workloads, or client churn.
• Integration challenges: Merging systems, processes, and teams across acquisitions is rarely smooth.
• Overleveraging risks: With so much capital at play, a single misstep could jeopardise the firm’s future.
For many firms, the question becomes whether the short-term financial gain is worth the potential long-term compromises.
The mid-tier squeeze: Winners and losers in the PE game
Mid-sized and smaller firms are feeling the pressure most acutely. PE-backed platforms are hunting for tuck-in acquisitions—smaller firms they can absorb to bolster their portfolios.
• Winners: Well-run firms with strong leadership and unique specialisations often fetch higher multiples.
• Losers: Firms struggling with inefficiencies or weak client bases may find themselves undervalued or left out entirely.
As the PE race accelerates, firms must decide whether to compete, partner, or carve out their own independent path.
The long-term outlook: What happens when the rush ends?
While the immediate focus is on acquisitions and growth, the endgame for private equity is clear: a profitable exit. This could take the form of:
• IPO listings: Some PE-backed firms are likely to go public, creating the first true publicly traded global accounting brands.
• Secondary sales (Flips): Platforms may sell to larger PE funds or merge with other accounting giants.
The big question is whether these firms will thrive under new ownership—or falter under the weight of integration challenges and high expectations.
Should you join the rush or stay independent?
Before diving into a PE deal, firms need to ask themselves tough questions:
• Do you have strong leadership? Without capable leaders, integrating with a PE platform could amplify existing challenges.
• Does PE align with your values? If your firm prioritises client relationships and long-term stability, PE’s profit-first focus may feel like a poor fit.
• What will you gain—and lose? Consider not just the financial benefits but also the cultural and operational impacts.
For those unsure about PE, alternative strategies—like strategic alliances or tech investment—can provide paths to growth without relinquishing control.
Boom or bust?
The private equity gold rush has created unprecedented opportunities for accounting firms. But it has also introduced risks that can’t be ignored.
For some, PE represents the chance to innovate, grow, and future-proof their business. For others, it could mean losing the very identity that made their firm successful.
The key is to approach every opportunity with clear-eyed due diligence and a focus on long-term goals. Whether you strike gold or avoid a bust depends on how well you prepare for the road ahead.
PS: Check out the full episode between Allan and James
here on the M&A Diaries podcast.
