Key facts
- Patrick Hughes, head of accounting services at Houlihan Lokey, discussed the state of accounting M&A.
- Hughes believes AI will enhance efficiency and profitability in accounting services.
- He anticipates a significant wave of deal activity in the accounting sector through 2027.
- Hughes noted that regulatory changes and alternative practice structures have enabled private equity investment in accounting firms.
- He cited TowerBrook Capital Partners' investment in EisnerAmper and New Mountain Capital's investment in Citrin Cooperman as catalysts for industry change.
Patrick Hughes, head of accounting services at Houlihan Lokey, discussed the evolving landscape of mergers and acquisitions within the accounting industry. Speaking on the 'Behind the Buyouts' podcast, Hughes noted that the sector has transformed from a largely untapped market to one where over half of the top 100 accounting firms have private equity backing. This shift has been facilitated by alternative practice structures and regulatory changes, which have unlocked capital for acquisitions, technology investments, and operational transformations. Hughes highlighted TowerBrook Capital Partners LP's August 2021 investment in EisnerAmper LLP and New Mountain Capital LLC's April 2022 investment in Citrin Cooperman as key catalysts for this industry change, alongside Grant Thornton's strategic initiatives. Despite concerns about AI disruption, Hughes believes artificial intelligence will enhance efficiency and profitability without replacing the essential trusted-adviser role of accountants. He anticipates a significant wave of deal activity through 2027, supported by strong private equity demand, long portfolio hold periods, and improving macroeconomic conditions. Hughes mentioned that many companies are currently holding back from the market due to uncertainty surrounding AI, but are ready to sell or seek new partners once this period passes.