Keys to the Future: PE Must Move from Promises to Delivery

INSIDE Public Accounting and Rosenberg Associates conducted a survey to gather perspectives from professionals across the accounting profession on the growing influence of private equity (PE). The survey respondents provided insight into how those at the helm experience and interpret this significant shift within the profession. View the full IPA Insights June preview. The following are Matt Rampe’s insights from the survey data.

Private equity entered the accounting industry with big promises of creating value and fixing many of the pain points in the profession. The data shows that while PE is already delivering on some of those promises (e.g., higher growth, shift to advisory, and cost reductions), it also shows that there are mixed feelings in the profession about what the long-term impact will be.

A Roadmap for PE Success – Or Failure – Emerges

While the data shows early signs of success for PE investments, it also reveals warning signs that shed light on the path ahead:

• Success for PE is more likely if:
  • Accountability around running a CPA firm like a business is elevated, while also being sensitive to CPA firm owners who may fear the loss of autonomy or be historically resistant to being told what to do.
  • Staff are kept engaged and satisfied – both financially and non-financially (e.g., strong firm culture, investment in professional development, work-life balance maintained, etc.).
  • Client experience and work quality remain strong, even as the firm scales. These are central to maintaining a viable firm.

• Failure is more likely for PE if:
  • Sales and productivity targets feel unsustainable, increasing team burnout and disengagement.
  • Clients experience a lack of personal attention, over-pricing or operational challenges that come from scaling too quickly.
  • Cost reductions are done in a way that wins the battle but loses the war, such as cutting “extra” expenses to show near term profit. This erodes firm culture and values.
  • The drive for efficiency reduces work quality to a level that becomes harmful. Conflicts of interest or low work quality could also harm public trust in CPAs.

The Proof Is in the Pudding

With early success and also considerable reservations in the industry about its impact, private equity will need to skillfully balance the tensions above to create economic value and a positive legacy in the industry. How that long-term legacy is defined depends on how well PE delivers on the promise of a brighter future.