From Going Concern, December 17:
PE Partner Reveals the Real Reason Private Equity is Going Crazy For Accounting
The quotes you’re going to read below were shared in last Friday’s Footnotes but we thought it prudent to give the topic its own post because private equity is quickly gobbling up accounting firms at an increasingly rapid pace and surely we’ve all been asking what’s going to happen to these investments in the long-term.
Jason Berg, a partner at Lovell Minnick Partners (who made a minority investment in #47 firm Cohen & Co. in October), spoke to a publication called Mergers & Acquisitions recently and pretty much put it all out there. So, why is private equity so interested in accounting?
Yes, you read that right. Offshore tasks can be done more cheaply.“It’s an industry that’s very large. It’s got a massive, addressable market. It’s an industry that’s highly fragmented,” Barg says of the 45,000 accounting firms, most of which remain founder-owned. “It’s a recurring revenue model. It’s mission-critical and it’s an industry going through some changes.”
In particular, many accounting firms use antiquated technology and offshore tasks that can be done more cheaply and efficiently with tech upgrades.
Hiring a bunch of people offshore for a fraction of what US-based talent costs (often while laying off said US-based talent) is cheap but having technology do it is no doubt cheaper. In other words, robots aren’t taking your job. Robots are taking the job of the Indians who took your job....
....MUCH MORE
