By Natalie Burke, an RSM Accounting Thailand 2026 intern currently studying in the United Kingdom
Private Equity Group Investment:
Private equity investment is a group of investors who either have available investment monies or the means to source such to buy firms, partnerships, companies or other types of entities, with the goal of ultimately selling them for a handsome profit or investment return. To gain profits or investment returns, private equity groups invest and / or raise capital to then increase the revenues of the target entities. This then increases the target entity value and by doing this, when they sell the entity, they gain more than what they initially paid.
Private Equity Investment in Accounting, Payroll and Tax Consulting Firms:
In recent times, Accounting, Payroll and Tax consulting firms have increasingly been on the radar of private equity groups with large second tier firms such as Grant Thornton and Baker Tilly already having received large investments from private equity. The interest in these types of entities was primarily commenced in 2021, when TowerBrook Capital Partners, a private equity firm, invested in EisnerAmper LLP, a top accounting firm in the U.S. RSM Accounting in Thailand has been informed by many of its global network firms that private equity investment groups have made regular recent approaches to them and it has been widely reported that the outsourcing arm of one former RSM network firm in one jurisdiction after being purchased by a third party was subsequently sold to a private equity investment group.
But why the interest in accounting, Payroll and Tax firms in particular?
Private equity groups are mainly attracted to accounting, Payroll and Tax entities due to their recurring revenues. Accounting, Payroll and Tax entities, normally, have high levels of reliable and repeat revenues because they provide services such as accounting, audit and tax, which are services that are necessary for businesses in all sectors on an annual basis. This therefore provides certainty to a stable cash flow and brings revenue visibility to investors. This is particularly attractive as this reduces risks of investment, specifically currently, during a time of geopolitical uncertainty, especially in the Middle East.
Accounting, Payroll and Tax consulting firms are also of significant interest to private equity groups due to the fragmented nature of the industry. With there being lots of independent small and mid-size firms, this brings opportunity to private equity groups as they may use “roll up” strategies to obtain and combine these smaller firms and create bigger and more efficient organisations possibly via the use of AI and tools.
Finally, there is a large amount of potential for some of these accounting, payroll and tax consulting firms to grow. This is especially true for those entities that are lacking in up to date recent technology due to possibly not having the necessary capital to invest in such or for other reasons as there are many opportunities within accounting, payroll and tax entities to incorporate tools such as latest automation or even AI and ChatGPT, which can assist in providing more efficient services with better cost benefits. Accordingly, private equity groups perceive accounting, payroll and tax and in some cases even audit consulting entities as very attractive investment targets.
How would a deal with a Private Equity Firm and an Accounting, Payroll and Tax Consulting Entity be Structured?
A private equity group investment in accounting, payroll and tax consulting entity will generally follow a pattern which is predictable and therefore although timelines and strategies differ, most funds in the past have operated within a period of a 5–7-year ownership period. More recently this has changed with many private equity groups preferring entry and exit periods within 3 years if possible.
Typically, the first 2 years of a private equity group investment focus on private equity groups raising capital and fundraising to create a fund though many private equity groups already have the funds and consequently only need to focus their time and efforts on identifying suitable targets. In the past, this fund would generally last around 10 years. They do this by having a clear strategy and finding suitable business opportunities that fit their investment preferences. Finally, they secure capital commitments and determine the capacity of the fund to invest.
Then, from around years 2-6, the goal is to improve the business to increase the value. This includes many strategies such as increasing efficiency. This could be done by getting rid of surplus staff and strengthening margins sometimes up to 40% or more. Similarly, private equity groups also may seek to invest in technology such as AI for operational efficiency gains or they could simply modernise software. As mentioned before, these firms may additionally implement “roll up” strategies to expand things like geographic footprint. Finally, with the goal of growth, private equity groups could try to acquire executives that can help drive rapid growth, beyond what previous leadership could do.
Finally, the last phase is the exit, where private equity group investors “harvest” returns. Generally, the target for private equity group investors is anywhere from double to quadruple what their initial equity investment was. One typical exit strategy is that they will sell the entity to either another private equity group or a larger entity. A “secondary sale”, selling to another private equity group or investor, specifically is generally quicker and less complicated than most other exit strategies. However, it also can only occur if the purchase believes they can further advance the value of the company. Another strategy is recapitalisation in which the entity is refinanced, and this allows the private equity group fund to take cash out, whilst also keeping partial ownership. Lastly, they may exit through an Initial Public Offering, where the portfolio of the entity is listed on a public stock exchange. This allows the private equity investor to then sell its shares to the public, but this is uncommon with accounting, payroll and tax entities.
What is the Impact of Private Equity on Accounting and Consulting Firms?
One of the main things private equity group investment impacts is growth. Private equity groups invest in capital to increase the resources of the accounting, payroll and tax entity. This includes many things such as investing in technology, and talent.
By improving technology systems, accounting, payroll and tax consulting firms can adopt and upgrade their technology which could include investing in artificial intelligence or automation. Through automating tasks that are repetitive or time intensive such as payroll processes and data entry, this allows consulting entities to focus on other tasks that help increase revenue.
There will also be an increased ability for accounting, payroll and tax consulting entities to attract top talent. Not only can private equity group investment help employees have stronger training programs, but it can also make sure that the entity can offer a higher salary and more benefits. With private equity group investment, some consulting entities may invest in compensation packages for employees to stay competitive against other entities. This helps ensure that the entity acquires the best talents in the industry.
This growth, due to a provision of direct access to growth capital, results in rapid expansion in accounting, payroll and tax consulting firms. This investment in capital also enables these consulting entities to follow growth opportunities that otherwise would have required years to accumulate.
This impact of private equity investment on growth can be shown through the example of Grant Thornton US, who in March 2024, sold a majority stake to the private equity firm, New Mountain Capital. Their goal was to go global and rapidly. They did this by investing in AI and automation as well acquiring Grant Thornton sister firms including GT Ireland to speed up cross-border growth. After this investment, in September 2024, Grant Thornton international hit $8 billion in revenue globally, growing +8.8% YoY. This was the fastest among all the top mid-tier firms.
The Future:
This investment in accounting and consulting firms is already increasingly becoming a trend, especially with mid-tier firms. According to a study conducted recently by the Institute of Chartered Accountants in England and Wales (ICAEW), out of 36 mid-tier UK accountancy firms surveyed, nearly all had been approached by at least one private equity house in 2025. Furthermore, 64% of the firms viewed private equity investment as the “top macro trend shaping the profession”.
Overall, it seems that private equity investment in accounting firms will only become more frequent, largely shaping and transforming the industry for the future.
Ramifications of Private Equity Investment in Accounting, Payroll and Taxation Consulting Entities:
Private equity investment in accounting, payroll and tax consulting entities can result in numerous ramifications and this article does not seek to comment on whether these are advantageous or not to the industry but simply to mention a few.
- Existing owners can exit sooner and more easily having received an initial sum of money for their investment followed by the remainder at the exit of the private equity group involvement
- Introduction of new or more modernised technology causing larger profit margins as well as potentially more ongoing revenues
- Reduction in staff following automation and more efficiencies particularly regarding process type work
Increased pressure and KPIs for staff that remain with the consulting entities with greater reporting to private equity investment representatives - Potential independence and conflict issues if entity also has an audit business attached to its consulting services and is part of a global network
- Possible reduced succession opportunities for staff or even directors and partners with smaller or no levels of equity in entity
Should you require any advice with respect to this article or any of our Audit, Accounting, Payroll, Taxation, Legal or Recruitment and Outplacement Service, please do not hesitate to contact us on Askus@rsmthailand.com. Further, if you are considering a sale to a private equity investment group and require advice, please feel free to reach out to RSM Legal Services Thailand or RSM Taxation Services Thailand.