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5 reasons private equity investment in accounting elevates resource management

Andrew Bone Chair & Co-founder




accountancy , growth , private equity , resource management

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.  

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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. 

2. A willingness and ability to make strategic investments

It’s a popular misconception that private equity firms are all about asset stripping and cost reduction. The reality is they will invest if it grows the value of their investment in the long term. Those investment decisions are made by a small executive management team, much more quickly than when they require the consensus of a large partner group. The business case for resource management teams and tools is incredibly strong, and private equity backed firms can make it happen. 

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. 

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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: 

  1. Improving financial performance  
  1. Ensuring client satisfaction, and 
  1. 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 better resource management practices 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.

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