What’s the future of private equity in accounting?
What’s the future of private equity in accounting?
Is the influx of private equity in the accounting industry here to stay? We asked Stuart Marcy of Gerald Edelman about the impact it is having.
It’s too early to tell if the spate of private equity activity happening across accounting is a painful flash in the pan or a long-term part of the industry, Stuart Marcy, head of private equity at Gerald Edelman, has told AccountingWEB. Marcy joined the mid-tier accounting and advisory firm with the remit to expand its presence in the market.
Marcy has more than 20 years of experience in corporate finance and private equity (PE), and has previously held positions in Big Four and mid-tier corporate finance teams, as well as working in the private equity sector itself.
Growing part of the economy
Speaking to AccountingWEB, Marcy noted that Gerald Edelman has never coordinated its marketing and business development in private equity.
“Given that the private equity sector is an important and growing part of the UK economy, especially on Gerald Edelman’s home turf of London and the South East, now is the time to build our brand in the PE market,” he said.
“Additionally, the BVCA [the British Private Equity and Venture Capital Association] estimates that some 85% of PE-backed companies employ 500 people and under, which is Gerald Edelman’s mid-market/SME [small or medium-sized enterprise] area of focus.”
He added that while the firm’s corporate finance team is working regularly with UK private equity firms, it wants to see “more of that, both in terms of deal advisory and due diligence”.
“Likewise, a part of my job is to make sure the PE world knows that they can get top-quality audit, tax, outsourced services and more from a firm of our size.”
Rush into the space
So far as the wider impact that private equity is having on accounting – where there’s been a rise in firms circling the industry – Marcy said it’s been “interesting to see the rush into the space by PE firms on both sides of the Atlantic”.
“PE firms work hard to grow the companies they invest in, making them more efficient and profitable,” he added. “This can be a great thing, but they will eventually want to sell the accounting firms they’ve bought.
“Given the first deal was done in 2021 it’s too early in the life cycle of the investments to know how this will go. That will determine whether it’s a painful flash in the pan or a long-term part of the accounting industry.”
Alignment of culture
As for the message to those who have genuine concerns about it? Marcy believes it “depends on the audience”.
“From the point of view of a firm considering investment from PE, the message would be that they can bring much-needed expertise and points of view, as well as potentially help attract talent, a perpetual problem across the industry.
“But do your homework, because there needs to be alignment of culture, expectations and, in the end, personality. ”
While we may not know what the long term looks like for private equity in the accounting industry, Marcy notes that there are “a number of deals still in the works, but I wonder if there might be a pause to see how the regulators react to all the takeover and consolidation activity, and whether some of the earlier deals in the sector can achieve successful exits”.
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