Personal fairness is investing in accounting: What does that imply for the way forward for the enterprise?

Personal fairness companies have purchased 5 of the highest 26 accounting companies prior to now three years as they mount a concerted technique to reshape the business. 

The pattern mustn’t come as a shock. It is one we have seen play out in a number of industries from well being care to insurance coverage, the place a mixture of low-risk, recurring income, scalability and an growing old inhabitants of householders create a target-rich surroundings. For small to midsized accounting companies, the pattern is exacerbated by a technological revolution that is actually remodeling the way in which accounting work is completed, and a rising expertise disaster that’s threatening tried-and-true enterprise fashions.

How will one of these consolidation have an effect on the accounting enterprise, and what do companies and their purchasers have to be looking out for as {the marketplace} evolves?

Assessing the chance… and the chance

Firstly, accounting agency homeowners want to pay attention to simply how fascinating they’re proper now. Whereas there was some buzz within the business concerning the rising presence of personal fairness companies, a lot of the exercise to this point has centered on bigger, privately held companies. In truth, once we just lately requested tax professionals about their publicity to non-public fairness funding in our 2025 State of Tax Professionals Report, we discovered that simply 5% of companies have really inked a deal and solely 11% stated they’re planning to look, or are presently trying, for a take care of a non-public fairness agency. One other 8% stated they’re open to dialogue. On the one hand, that is virtually 1 / 4 of companies feeling open to non-public fairness investments in a roundabout way. However the lion’s share of respondents —  87% — stated they weren’t .

Latest non-public fairness deal quantity means that the holdouts would possibly change their minds once they have an actual supply on the desk. In accordance with S&P International, non-public fairness and enterprise capital-backed deal worth within the accounting, auditing and taxation companies sector reached greater than $6.3 billion in 2024, the best degree since 2015, and the pattern exhibits no indicators of slowing. Agency homeowners can be smart to start out watching this pattern to see the way it would possibly have an effect on their companies — whether or not they’re thinking about promoting or not.

Concentrate on tech and efficiencies of scale

The explanation this pattern is so vital to everybody within the business proper now could be that the non-public fairness companies getting into this area usually are not attempting to develop into accountants. They’re in search of worthwhile exits. And they’ll do this by seizing on a essential inflection level within the business that is making it potential to scale accounting companies extra quickly than ever earlier than by leveraging expertise to ship a a lot wider vary of companies at a a lot decrease value. So, whether or not your agency is thinking about partnering with non-public fairness or useless set on going it alone, the hyperscaling that is taking place all through the business will have an effect on you a technique or one other.

Personal fairness thrives in fragmented companies the place the flexibility to roll up firms with complementary ability units and specialised companies creates an outsized progress alternative. Andrew Dodson, managing associate at Parthenon Capital, just lately commented after his agency took a stake within the tax and advisory agency Cherry Bekaert, “We predict that for companies to thrive, they should make investments in individuals and expertise, and, clearly, regulatory adherence, to actually differentiate themselves available in the market. And that is going to require scale and capital to do it. That is what will get us excited.”

Over time, this might reshape the business’s market dynamics by creating the accounting agency equal of the Touring Wilburys — supergroups able to delivering a variety of specialised companies that smaller, extra narrowly centered companies may by no means beforehand ship. It may additionally put downward strain on pricing as these bigger, platform-style companies begin discovering economies of scale to ship companies extra cost-effectively.

The expertise issue

The good equalizer in all of that is expertise. Constantly, once I communicate to tax professionals actively working available in the market right this moment, their prime priorities are elevated effectivity, progress and expertise. Companies acknowledge they should streamline workflows and processes by means of more practical use of expertise, and they’re investing closely in AI, automation and information analytics capabilities to do this. Personal fairness companies, in fact, are additionally investing in tech as they assemble their tax and accounting dream groups, in lots of circumstances elevating the bar for the business.

The query is: Can impartial companies leverage expertise quick sufficient to maintain up with their deep-pocketed competitors?

Many companies imagine they’ll, with some even going as far as to publicly declare their independence.  Whatever the path small to midsized companies take to get there, technology-enabled progress goes to play a key position in the way forward for the business. Market dynamics which have been unfolding for the final decade have been accelerated with the introduction of significant buyers, and everybody within the business — massive and small — goes to wish to up their video games to remain aggressive.