Why private equity spurs smarter resource management in accounting
Private equity isn’t just about funding but rather a catalyst for transformation. In accounting firms, private equity investment drives the need for greater efficiency, strategic growth, and employee satisfaction. Here's how and why resource management becomes a central focus in unlocking the full value of these investments.
The announcement that Hellman & Friedman (H&F), and Valeas Capital Partners have acquired a majority stake in Baker Tilly US continues the trend of private equity firms taking significant stakes in accounting firms that traditionally operated as partnerships.
The influx of new capital into the sector will drive change. One of those changes is an increase in the strategic importance of resource management.
Here's why:
1. A drive for ROI
As sure as night follows day, private equity investors want to make a return on their investments. Firms that previously made a good living for the partners and saw no reason to change will be pushed to reach the next level of productivity and margin. In a professional services firm, this means making better use of people’s time, whether by saving on admin or optimizing how staff are deployed on client work. In other words, effective resource management. This evolution places greater emphasis on the management of resources as a lever for both profitability and productivity.
2. A willingness and ability to make strategic investments
A lack of visibility into resource availability, siloed software and data, and different approaches to scheduling results in underutilized resources. Using a dedicated resource management solution that consolidates engagement and resource data in one place enables efficient, balanced allocation of work on a large scale, with full visibility of resource availability and suitability.
3. A need to integrate acquisitions
Private equity backed accounting firms usually seek inorganic growth through acquisition, and sure enough, this is one of the stated aims of the Baker Tilly US investment. As we know from working with private equity backed firms like Azets, firms must integrate these acquisitions and work as one in order to create more value than the sum of the parts. This can't happen without joined up resource management and shared systems.
4. An increase in scale
Through both organic and inorganic means, firms backed by private equity will aim to achieve double-digit year-on-year growth. Effective resource management is critical to cope with that level of scaling and change while continuing to meet client and staff needs.
5. A necessity to keep the team happy
New ownership creates unease in the ranks, but it’s these people that are the primary asset the private equity firm is buying into, so retention is critical. In the short to mid-term, firms need to genuinely reassure their staff and keep them happy if they are to avoid value-eroding attrition. Longer-term, staff engagement and performance will come from interesting work that aligns to their personal development goals, as slogging for years towards the dangling carrot of, “making partner” is no longer a strong motivator. Effective resource management has a crucial role to play in delivering employee autonomy and satisfaction.
When done right, resource management sits at the intersection of:
- Improving financial performance
- Ensuring client satisfaction, and
- Keeping staff happy.
In other words, the three key things you need to balance to run an effective professional services firm. These are sometimes conflicting priorities, but through more effective management of resources and the software to enable it, your firm can improve all three, all at once.
Private equity in accounting will change the game in ways that we probably can’t foresee, but I’m certain resource management transformation will be at the heart of making these investments successful.
