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PRACTICE MANAGEMENT

who want to buy into the business. Waggoner- WHY PRIVATE EQUITY IS INTERESTED IN
Aguilar wasn’t interested, but the proposals made ACCOUNTING
her curious. Investors have eyed the accounting world for years.
She soon learned that private-equity investors But these deals have come to fruition in recent
have been buying their way into the world of years because private equity now sees accounting as
accounting, planning, and advisory services — a an ideal market for growth.
push that has spread since 2021 to some of the “We saw an opportunity that is similar to ones
country’s largest public accounting firms. that we’ve seen in similar markets, like wealth
Waggoner-Aguilar realized these outside inves- management, like insurance distribution,” said
tors had “a completely different perspective” than Andrew Dodson, managing partner of Parthenon
she and others in the profession did, she said. They Capital, which announced its investment in Cherry
saw an opportunity to use surges of investments to Bekaert this June.
grow firms more quickly, she thought — in ways As with those other professional service-based
that accountants have perhaps not embraced. businesses, the accounting market is “super highly
She wondered: “Is this the new trend?” fragmented,” Dodson said, with tens of thousands
Notable new private-equity deals began to of firms arrayed across the country. That is entic-
surface in August 2021, when TowerBrook Capital ing for investors, who see an opportunity to build
Partners announced its investment in EisnerAmper, “platform” firms that can then acquire their smaller
an accounting firm that employs more than 3,000 competitors. In short, they see an opportunity
people globally. to become market leaders in spaces that aren’t
Similar announcements have followed for the controlled by large, dominant players.
large firms Citrin Cooperman and Cherry Bekaert, Just as important, it is a market facing trans-
and other investors have set their sights on firms formative changes. Large accounting firms are
and consultancies of all sizes. As the head of Koltin seeking money infusions to conquer the biggest
Consulting Group in Chicago, Allan Koltin, CPA, challenges facing the profession: talent, technology,
CGMA, has been an adviser at the center of some and growth.
of the largest recent deals. Koltin said he is in talks “We think that for firms to thrive, they need to
with dozens of groups about private-equity deals, make investments in people and technology, and,
and he projected that as many as six of the largest obviously, regulatory adherence, to really differenti-
accounting firms will strike deals by mid-2023, ate themselves in the market,” Dodson said. “And
along with countless smaller firms. that’s going to require scale and capital to do it.
“Of the top 20 [public accounting] firms, more That’s what gets us excited.”
than half of them are in some type of transforma- As with other deals described in this article,
tive discussion — and a big part of that transforma- the partners in the Cherry Bekaert deal have not
tive discussion involves private equity,” Koltin said. disclosed the details of the investment, including

IN BRIEF

■ Private-equity investors have eyed the One option is to split the firm into two investments anticipate that
accounting world for years because organizations. accelerated growth projections go
they see accounting as an ideal market ■ A private-equity deal also comes with hand in hand with a larger technology
for growth. In the past 18 months, a change in financial rewards and budget and improved retention and
several accounting firms struck deals. payouts, which tends to benefit senior recruitment.
■ A private-equity deal requires a firm to partners. But it also introduces new ■ Negotiations between more firms
restructure. Regulations stipulate that financial risks and requires a laser- and investors are ongoing, but future
audit firms must at least be majority- sharp focus on independence and deals will likely be influenced by how
owned by CPAs, which disqualifies professional standards. investments that have already been
most would-be private-equity owners. ■ Firms that accept private-equity made shape up.

To comment on this article or to suggest an idea for another article, contact Courtney Vien at Courtney.Vien@aicpa-cima.com.

8 | Journal of Accountancy February 2023