How Private Equity is Transforming M&A in the Accounting Industry

In recent years, private equity M&A has been transforming the accounting industry, reshaping how firms approach mergers and acquisitions. It’s changing how the industry operates and shaping its future in a big way. By 2032, the accounting sector is projected to reach $1.5 trillion, a significant jump from $628.4 billion in 2022, with a steady growth rate of 9.3% annually, according to Allied Market Research. A large part of this boom is due to the influence of private equity in M&As, which is altering business models as well as driving technological innovation.

So, how exactly is PE M&A reshaping the accounting landscape? And what can your firm do to stay ahead? Leveraging relationship intelligence and advanced client analytics can help attract private equity investments and address M&A challenges. These tools aren’t just for enhanced due diligence—they can also help you expand into new service lines and strengthen client retention after the deal is done.

From partnership to private equity backed M&A business models

Historically, accounting firms have run on a partnership model, where chartered public accountants (CPAs) own most, if not all, of the business. While this approach has worked well over the years, it comes with its own set of challenges—especially when it comes to accessing the kind of investment needed for significant growth and tech upgrades. This is where private equity M&A steps in. With PE investments, a firm can explore a dual business model: one side focusing on core accounting services like auditing and attestation, and the other branching out into complementary areas such as consulting.

Private equity M&As in accounting firms started to really pick up in 2021 when investors began purchasing significant stakes in top firms like EisnerAmper, Citrin Cooperman, and Cherry Bekaert. Since then, even two of the top 10 largest accounting firms in the U.S.—Grant Thornton and Baker Tilly—have sold the majority of their shares to private equity.

Many people in the industry have found themselves asking what drove PE into the accounting profession. First, the accounting industry is highly fragmented, offering plenty of opportunities for consolidation. Per Winding River Consulting’s recent webinar, A Candid Conversation: The Unspoken Questions Around Private Equity, baby boomers reaching the end of their careers are now faced with a lack of viable succession options, accelerating the need for change. Traditionally, older partners would sell their shares to younger partners. However, this model is breaking down—there simply aren’t enough young professionals to take over, which, as noted during the webinar, leaves firm owners holding a valuable asset without clear options for succession.

The other question that arises is why PE finds accounting firms so attractive. While there are several reasons, the first is that accounting firms offer stable and predictable cash flows, with clients requiring their services consistently year after year. They also boast strong client relationships, which is especially valuable when expanding into new markets. The accounting industry is also more traditional in nature, making it ripe for the technological and operational improvements that PE can introduce to help firms scale quickly and profitably. In other words, PE is also helping firms modernize and capitalize on new opportunities.

Navigating private equity M&A in accounting firms 

One of the core advantages of private equity M&A is the ability to expand service lines and invest in innovative new technologies. For example, your firm may use private equity M&A capital to acquire smaller accounting practices or expand into other areas — such as consulting or wealth management. PE capital infusions also support the adoption of cutting-edge technologies that help to streamline operations, reduce manual time spent on tasks, and improve service delivery.

While there are several benefits to PE investment, your firm may struggle attracting these types of investors. Plus, once they express interest, you want to ensure that the appropriate checks and balances are in place before agreeing to sell most of your shares. To prepare, you can use client intelligence to attract PE investment and support your organization through the M&A process.

Attracting private equity M&A investors with client intelligence

PE firms look at several areas of your business when deciding whether to invest in your firm. However, a key thing private equity M&A investors want to know is whether you have adopted technologies that centralize information and make it easier for advisors to collaborate. If your firm has an already-robust tech stack, it means the business doesn’t need to be consistently reinvented. Moreover, using certain technologies — like client intelligence and a client relationship management (CRM) platform — helps set the stage if you’re looking to conduct measurable growth-related actions.

Client intelligence helps you attract PE investors by positioning your CRM platform as a single source of truth for storing and augmenting important client data. This signals that your firm is ready to grow and has the tools to position itself for long-term success. At the same time, relationship intelligence technology enables collaboration by helping advisors conduct white space analysis to identify where opportunities lie for advisors to work together across service lines.

Facilitating effective due diligence during an M&A

Due diligence is a key part of any M&A deal, and relationship intelligence provides a more thorough review. By offering an objective view of your firm’s connections, it helps you assess the strength and depth of those relationships, which is essential for evaluating cultural fit and future revenue growth opportunities with potential partners.

Beyond that, relationship intelligence helps uncover potential risks—like conflicts of interest or strained client ties—that could complicate a merger. Identifying these issues early supports a smoother integration process, building trust among stakeholders and setting the stage for a successful private equity transaction.

Using client intelligence to expand service lines

Expanding service areas is a critical strategy if you’re looking to grow and diversify your revenue streams. Relationship intelligence plays a crucial role in this process by providing you with detailed insights into client needs and helping you identify gaps in service delivery. Using advanced client analytics, your firm can develop tailored, client-centric solutions. For instance, if relationship intelligence shows a high demand for advisory services among existing clients, you can invest in building its own advisory practice.

Additionally, relationship intelligence helps you identify cross-selling and upselling opportunities by identifying which of your clients may benefit from additional services. By leveraging client intelligence, your firm can ensure its service expansions are data-driven and aligned with client demands, leading to higher success rates and improved client retention post-M&A.

Next steps

Introhive’s relationship intelligence platform allows for successful private equity M&A in accounting firms. Our software streamlines operations and positions your CRM as a source of truth, helping to attract PE investors. We also deliver timely and advanced relationship analytics that help you conduct M&A due diligence and develop new client-centric service offerings. Request a demo to learn more.