Big Money Moves into Accounting Firms

In a big move in the accounting world, private equity firms are starting to buy lots of accounting firms. This marks a significant trend where private equity firms, which are investment companies that buy shares in businesses to help them grow and then sell them at a profit, are targeting large firms. In the United States, Grant Thornton, with its $2.4 billion revenue for the fiscal year ending July 2023, is now the largest CPA firm to enter into such a partnership.

Since 2021, private equity firms have taken stakes in five of the top 26 U.S. accounting firms, including EisnerAmper, Citrin Cooperman, Cherry Bekaert, and Baker Tilly. The accounting community is now speculating about which firm will be next, with BDO and RSM often mentioned as potential targets.

Why are private equity firms interested in accounting firms? The reason is that the accounting industry is undergoing significant changes. Technological advancements and a shift towards more profitable consulting services mean that firms need substantial investment to adapt and grow. Private equity firms provide this capital, enabling accounting firms to invest in new technologies and expand their services.

Grant Thornton is taking this opportunity to restructure for better growth and agility. They are splitting into two parts: Grant Thornton Advisors LLC for consulting and non-audit services, and Grant Thornton LLP for auditing. This split will allow them to focus on targeted investments in talent, technology, and infrastructure, making them more competitive.

This trend of private equity investments is reshaping how accounting firms operate, making the industry more dynamic and prepared for future challenges. With the backing of private equity, these firms can accelerate their development and explore new opportunities.