How Private Equity Deals Are Changing: A Conversation With Accounting Today

Russell Shapiro recently joined Bob Lewis, president of the Visionary Group, and Rick David, founder and CEO of DANLEX Solutions LLC, for a conversation moderated by Daniel Hood, editor-in-chief of Accounting Today. The panel shared insights on some of the changes they are seeing in the market. Read on for highlights from the conversation, or view the full interview here.

• While the market is still seeing direct PE investment in accounting firms, the past few years have shown an increase in PE-funded platform firms acquiring other accounting firms as tuck-ins and expansion operations. PE financing is involved in these deals, but the platform firm is taking the lead.
• The market has gotten much more specific and refined, with firms now segmented by structure or practice focus and capital seeking specific segments.
• There are now far more deals involving PE investment in small firms than in years past, and the multiples are going up a lot in that segment. For larger firms, prices are starting to level off a bit, but it’s still a seller’s market.
• In past years, majority ownership was the norm for PE investors, but more recently the market has seen an increase in equity investors who are willing to take a minority interest, provided they can secure the protections they need.
• AI has introduced significant uncertainty into forecasting accounting firm performance. Metrics like profitability and staffing costs, which were once relatively predictable, are now harder to project, complicating valuation for investors pursuing M&A deals.

Navigating a transaction in today’s market? Reach out to Russell Shapiro or another member of LP’s Corporate Group.