PE in Accounting Views Vary

This non-committal headline brought to you by the very people who see many sides to equations. Point being, accountants’ views on private equity in the profession elicit the most accountant-like response that exists: “It depends.”

After attending the most recent AICPA ENGAGE event, I can say that, right now, this is the tone.

On the one hand, most accounting firm owners and managers enjoy the independent nature of their business. They set prices and services as they see fit for the best interest of their business, all while serving their clients at the highest level they know how and in a way that works for all involved.

Certainly there’s room for improvement on all fronts, but for the most part they own their flaws and aren’t necessarily looking for some big payout. Of course they work to make money, but mainly on the value of the services they provide, and, for a growing number, they are seeing a way to live the lives they want, work the hours they need to, and, again, serve their clients well.

Then, there are those who have been in a firm structure that is largely tied to time. Not just to billable hours, but to a partner and owner/stakeholder path that is long and often fraught with logged hours on par with other professional services like doctors and lawyers, but with a fraction of the pay. To them, private equity represents a way out, a proverbial golden parachute of sorts, and in a shorter amount of time.

And then there are firms that see a larger future where they can own other firms, services, and technologies but lack the capital to do so. To them as well, private equity is that path.

At the moment, the true implications of a financial force like private equity in the accounting profession remain to be seen. And, as such, the viewpoints from accountants do vary.

If you ask me, someone who has been on the sidelines of venture capital and private equity, reporting on its impact on businesses and the economy as a whole, as well as being among accounting professionals for three decades, I am skeptical to say the least.

I’ve watched the “dot-com bubble” grow and burst, leaving the stock market and people’s livelihoods in shambles. I’ve seen how shortsightedness and lack of oversight, due diligence, and true controls can disrupt and even dissolve major accounting firms. I do not wish this on any of the profession’s future, which I still see as bright.

To put it another way, to me the nature of accounting firms is, at its core, to help and to serve. The nature of private equity firms is to make a return on their investments, seemingly at whatever cost.

They install their own people to ensure their investment goes the way they need it to, and the independent nature, vision, and growth trajectory of most firms is inherently changed. All for the return. And right now, they are attracted to professional services and their recurring revenue, and that is good enough for many PE outfits to open their coffers and see what more can be done for the almighty return.

That being said, I don’t see PE as being all bad for firms. If it is truly their goal to use this type of capital to achieve firm owners’ core vision or finally see a way to move on in life for a time “well served,” then by all means, have at it. Just know as much as you can going into such a relationship, and be certain this will indeed help you achieve your goals and vision not only for you, but also for those who are a part of the firm as staff and clients.

To me, the future of accounting depends on owners and managers giving PE this pause and caution.