Private Equity Is Reshaping Accounting — Is South Africa Next?
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Globally, private equity (PE) is making big waves in accounting, and the ripple effects could soon reach South Africa. The once slow-moving, tradition-bound profession is transforming as private investors seek to acquire, scale, and streamline firms, and the returns have been impressive.
What Is Private Equity in Accounting?
Private equity involves investment firms buying into accounting firms, usually by taking a majority stake. These investors inject cash, expecting future profits, and often help drive firm expansion, acquisition of smaller practices, and digital innovation. Unlike traditional partners who slowly earn equity over decades, PE gives current partners a large upfront payout, often two to four times what they could earn otherwise, and helps the firm grow faster.
This trend kicked off in 2021 in the U.S., with major firms like EisnerAmper and Citrin Cooperman taking on PE funding. Since then, over a dozen top firms have followed suit, with many exceeding growth expectations and moving quickly to even larger deals.
Two Common PE Models in Accounting
The “Mothership” Model
A large firm takes PE backing and buys up smaller firms, merging them into one national or global brand.The “Roll-Up” Model
A PE-backed platform acquires regional firms but allows them to keep their own branding and autonomy.
Why Investors Love Accounting
PE is attracted to accounting because:
It provides predictable income from recurring services (like tax, audit, payroll).
It’s cash-flow positive — firms get paid regularly, and costs are manageable.
It’s an essential service — businesses always need accountants, even during downturns.
There’s room for tech-driven efficiency — many firms still rely on outdated processes.
What About the Risks?
Critics warn that PE involvement could:
Put firm culture and long-standing values under pressure to grow and deliver returns.
Over-prioritize profits at the expense of staff morale or client service.
Drive up firm valuations so high that later investors struggle to make returns.
Aggressive expansion can create debt-laden firms if investors over-leverage them.
But many of the firms involved argue otherwise. In their experience, PE firms act as advisors, not micromanagers. They help unlock growth without interfering in day-to-day work.
Could This Happen in South Africa?
It hasn't yet, but it could. South African firms face similar challenges to their global peers: succession issues, talent retention, and the need for digital transformation. Local PE investors are already active in sectors like law and insurance.
Signs of change are emerging:
More mid-sized firms are exploring external funding to scale faster and compete with the Big Four.
Succession planning is pushing older partners to look for exit strategies
Market conditions are ripe for consolidation investors looking for stable returns in a volatile market may start turning to local professional services.
Some early signs of change are visible. For example:
South African firms are increasingly open to mergers and acquisitions, especially as succession planning becomes a challenge.
Mid-sized firms are exploring external funding models to scale faster and compete with the Big Four.
Investors looking for stable returns in a volatile market may start turning to local professional services.
Final Thought: Is PE Good or Bad?
Like most disruptions, private equity isn’t inherently good or bad. For firms with strong leadership, clear values, and a strategic growth plan, PE can be a powerful accelerator. For others, it could mean giving up control or risking culture drift.
What’s clear is that the global accounting profession is changing. As U.S. and European firms embrace private equity and consider going public, South African firms must decide whether to hold the line, merge up, or join the investment revolution.
Will South Africa follow the trend — or chart its own path? Let us know what you think.
