Middle Market Growth Conversations Delivering Dividends: Investing in Accounting Firms
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Feb 2, 2024 Private equity firms are showing interest in investing in accounting firms, with multiple deals being made. The podcast discusses the reasons behind this trend, how to determine attractive accounting firm targets, and the opportunities in the sector. It also explores the challenges faced by accounting firms and presents options for transformation. The chapter on investing in accounting firms discusses challenges, considerations, and the importance of leadership. The podcast also highlights the growing trend of private equity investment in accounting firms and its transformational impact on the industry.
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Why Private Equity Suddenly Loves Accounting Firms
- Private equity interest rose because accounting firms suddenly needed capital for talent, technology, and transformation.
- Allan Koltin ties the surge to pandemic-era talent loss, costly tech investments (AI, bots, blockchain), and a shift from compliance to advisory services.
Match PE Buyer Appetite To Real Firm Size
- Segment targets by firm size when pursuing deals: heavyweights (>$500M), middleweights ($100M–$500M), welterweights ($5M–$100M).
- Koltin warns many PE firms want in but only ~500 firms matter, so match buyer appetite to realistic revenue bands.
Three Strategic Paths For Accounting Firms
- Firms face three strategic doors: do nothing, transform with capital into advisory services, or merge upstream with larger firms.
- Koltin notes many fiercely independent firms are now choosing mergers or capital because transformation requires cash and operational change.