Why a Unified, Cloud-Based Platform is Key to Merger and Private Equity Success

Amid partner retirements and talent wars, many accounting firms have arrived at a crossroads where they need to figure out “which way to grow.” M&A has always been an option, but private equity (PE) firms are giving inorganic growth strategies a new twist. In 2021, TowerBrook Capital Partners purchased an ownership interest in EisnerAmper LLP, the first such deal between a private-equity concern and a top 20 accounting firm. Since then, PE firms have reportedly set their sights on accounting firms with anywhere from $10 million to $1 billion in revenue.

Why are PE deals gaining traction in the accounting industry? On the one hand, PE firms are attracted to accounting firms because of the steady revenues from accounting and auditing services and higher margins on the faster-growing consulting side. On the other hand, accounting firms are gravitating toward PE partnerships because of the growth paths they open up. Partnering with PE can enable accounting firms to evolve their service offerings more rapidly, enhance their investment in talent and technology, and expand their capacity to “merge up” by acquiring like-minded firms.

But, realizing the potential of an accounting/PE partnership won’t happen automatically. Having the technology in place to boost efficiencies as well as to integrate newly acquired businesses is key. And, that’s where a unitized, cloud-based platform like PracticePro 365 comes in.

An important factor in the success of any deal is figuring out how to streamline processes and improve productivity without adding headcount and administrative costs. In the accounting industry, this is often easier said than done. Firms that have historically grown through M&A often become saddled with a complicated environment of disparate, unintegrated systems that have been “inherited” throughout the years. Even those that do not have a strong history of M&A often find themselves in a similar situation due to the common tendency to purchase siloed, point solutions to solve issues as they arise.

When systems and the data housed within them can’t talk to each other, it creates slow month-end closings, cumbersome manual processes, and the inability to gain actionable insights. It can also produce enormous frustration as the firm’s highly skilled accounting and consulting professionals are forced to perform repetitive, low-value tasks like manually compiling reports or tracking billable hours. And, when the managing partner wants to see why a particular segment of the business is performing in a certain way, or even how someone came up with a number, the finance team has to scramble to figure out what’s going on. In an unintegrated environment, even basic questions from leadership can trigger a chain of time-consuming calls and emails, as back-office personnel gather data, analyze it, reconcile the numbers, and re-run reports.

Other factors to consider are scalability and flexibility. Aging, on-premises systems can be costly to integrate, update, and expand, especially when merging with another entity. In some instances, the limitations of the legacy systems can stop a merger in its tracks. A cloud-based platform like PracticePro 365 offers flexible, scalable options that are well-suited for growing firms, such as adding more users and licenses to accommodate new employees, consolidating data into a single source, providing more data storage, and adding new capabilities for processes and new lines of business. Plus, technology changes more rapidly every day, often requiring firms to make significant investments in automation, analytics, and mobility—all of which are “baked in” to PracticePro 365.

For these reasons, having a unified cloud-based system is essential for success in mergers and PE partnerships. A disparate legacy system environment is simply not conducive to putting a capital infusion to work in growing the firm’s business and creating the ROI PE investors are seeking. Nor is it favorable for developing and retaining up-and-coming talent, which is essential for sustaining the organization.

Contact us for a PracticePro 365 demo and to see how a unified cloud-based system can help your PE partnership or merger to come together harmoniously and efficiently.