The private equity (PE) world has its sights set on accounting firms – and for good reason. Mid-sized firms are proving to be highly attractive investment targets and the ripple effects have the potential to re-shape the global accounting industry.
For South Africa’s accounting sector, this presents an untapped opportunity.
The global surge in PE roll-ups of accounting firms
PE firms that seek to invest in accounting businesses are attracted by three factors:
- A fragmented market: With thousands of independent firms worldwide, there’s potential for consolidation, economies of scale, and efficiency gains.
- Predictable revenue streams: The recurring nature of accounting services makes firms a low-risk, high-reward bet for investors.
- High client retention: Businesses rarely switch accountants unless they’re dissatisfied, so firms that offer solid service enjoy long-term client relationships – and built-in revenue stability!
An example of this trend is Cooper Parry, a UK-based accounting and advisory firm.
In December 2024, US-based Lee Equity Partners took a majority stake in Cooper Parry, to accelerate its expansion and cement its position as a next-generation professional services powerhouse. But this wasn’t Cooper Parry’s first big move. In two years, the firm completed 11 acquisitions, bringing aboard players like Haines Watts London and UHY Manchester.
The result? Cooper Parry has achieved phenomenal growth – quadrupling turnover to £180 million in just two years, with annual organic growth exceeding 24% between 2021 and 2024.
The message is clear: strategic roll-ups can transform mid-sized firms into formidable industry leaders.
But is SA’s accounting industry actually ripe for PE?
At Ledger we believe so.
Like its global counterparts, South Africa’s accounting sector is highly fragmented. Mid-sized firms are competing for market share, but without the financial muscle or operational scale of larger players. The PE roll-up model could be a game-changer.
The key benefits of consolidation include:
- Stronger competitive edge: Larger, well-funded firms can compete more effectively against dominant players, offering a wider range of services.
- Operational efficiencies: Mergers eliminate redundancies, streamline processes and optimise technology use.
- Access to growth capital: PE backing enables firms to invest in talent development, innovation and market expansion.
How to really make it work in South Africa
Successfully rolling up accounting firms in SA requires a strategic and well-executed approach. At Ledger, we follow these guiding principles:
- Target the right firms; namely, mid-sized firms with complementary services and strong client bases.
- Align culture C values, because mergers fail when cultures clash.
- Leverage tech, including AI-driven accounting tools and automation, to drive efficiency.
- Secure expert guidance from specialists in PE transactions, to navigate regulatory and operational hurdles.
At the same time, we’re sensitive to the challenges of applying the roll-up model to SA firms. These include regulatory compliance, possible integration hurdles (linked to systems,
processes and company cultures), and the need to retain key talent.
The bottom line?
With PE roll-ups re-shaping the global accounting sector, SA accounting firms can unlock game-changing growth opportunities – provided that they prioritise smart strategy, the right partnerships and a focus on execution. The question isn’t whether PE roll-ups will take hold in South Africa, but who will lead the charge.
Sources:
- Accountancy Age (2024) ‘US Private Equity Firm Takes Majority Stake in Cooper Parry’, Accountancy Age, 10 December. Available at: https://www.accountancyage.com/2024/12/10/us-private-equity -firm-takes- majority -stake-in-cooper-parry /
- Britton, N. (2024) ‘The Rise of Private Equity in Accounting: Not Just for Large Firms Anymore’, Thomson Reuters Institute, 20 August. Available at: https://www.thomsonreuters.com/en-us/posts/tax-and- accounting/private-equity -accounting-firms/
- Cherry Bekaert (2024) ‘Private Equity Report: 2024 Trends and 2025 Outlook’, Cherry Bekaert Insights, December. Available at: https://www.cbh.com/insights/reports/private-equity -report-2024-trends-and- 2025-outlook/
- Financial Executives International (2024) ‘Private Equity Acquisitions of Accounting Firms: A Growing Trend’, Financial Executives International Daily, December. Available at: https://www.financialexecutives.org/FEI- Daily /December-2024/Private-Equity -Acquisitions-of-Accounting-Firms-A.aspx
- Intapp (2024) ‘Aligning Your Accounting Firm’s Tech Investments with Private Equity Trends’, Intapp Blog, December. Available at: https://www.intapp.com/blog/aligning-accounting-firms-tech-investments- private-equity -trends/
- International Accounting Bulletin (2024) ‘Cooper Parry Secures Lee Equity Investment’, International Accounting Bulletin, 11 December. Available at: https://www.internationalaccountingbulletin.com/news/cooper-parry -secures-lee-equity -investment/
- PR Newswire (2024) ‘Cooper Parry Partners with Lee Equity Partners to Deliver Transformational Growth for the UK’s Next-Gen Professional Services Group’, PR Newswire, 10 December. Available at: https://www.prnewswire.com/news-releases/cooper-parry -partners-with-lee-equity -partners-to-deliver- transformational-growth-for-the-uks-next-gen-professional-services-group-302327445.html
- Rose, S. (2024) ‘Waterland Sells Cooper Parry to Lee Equity’, PE Hub, 10 December. Available at: https://www.pehub.com/waterland-sells-cooper-parry -to-lee-equity /
- Shamis, G. (2024) ‘PE Investments into Accounting Firms: Is History Repeating Itself?’, Winding River Consulting Blog, 30 September. Available at: https://windingriverconsulting.com/blog/pe-investments-into- accounting-firms-is-history -repeating-itself
- The London Financial (2024) ‘Private Equity Firms Are Rolling Up Accounting Firms: Why and What Are the Implications’, The London Financial, December. Available at: https://thelondonfinancial.com/business/private-equity -firms-are-rolling-up-accounting-firms-why -and- what-are-the-implications
