Allan Koltin (Koltin Consulting Group) has served as an adviser and broker on many of the biggest M&A deals in the accounting space. During his keynote address at a recent NACVA conference, he made some observations that some may find surprising, including a prediction that private equity will soon own more than half of the top 20 accounting firms. While much of what he said related to CPA firms, BV firms are facing similar issues. As for the M&A frenzy, part of the reason for it is the recognition that acquisitions are needed for larger firms to be able to grow at a reasonable rate (you can only bill out so many hours). He also noted that once PE firms acquire a large accounting firm as an “anchor tenant,” they will seek out smaller firms with between $15 million and $100 million in revenue for potential M&A deals. He made several other observations:

• Offshoring is a model whose “time has come” because many practitioners have become so busy that they can’t devote enough time to managing their firms.
• The “war for talent” is “tremendous” and will continue for the next five to 10 years. The number of accounting grads is down and so is the number of CPA exams being taken.
• Staff costs have ballooned to 40% to 50% of overall firm costs (it used to be one-third each for overhead, staff/workforce, and partners’ profit).
• Reliance on compliance work is changing and is shifting more to higher value-added and more profitable areas of advisory services.

Koltin also noted that the aging of the profession is creating a need for succession planning, including some creative alternatives to traditional strategies.

A recap of the August 2022 Business Valuation & Financial Litigation Super Conference, hosted by the National Association of Certified Valuators and Analysts (NACVA), is in the October issue of Business Valuation Update.

Extra: The next NACVA “super” conference will be December 14-16 in-person from two locations: Park City, Utah, and Fort Lauderdale, Fla. A virtual option is also available, and sessions can be ordered á la carte. Click here for details.