Private Equity Investment in Accounting Industry - Patterns and Trends

Oct 27 2025 |

by Hugh Duffy

Accounting Practice Management

Private Equity Investment in Accounting Industry - Patterns and Trends

Private equity investment follows a predictable pattern. While timelines and tactics vary, most funds operate within a 5–7 year ownership horizon, with specific value-creation milestones along the way.

1️⃣ Fundraising and Investment Phase (Years 0–2)

Goal: Raise capital and acquire portfolio companies.

PE firms raise capital from institutional investors (pension funds, endowments, high-net-worth individuals) to create a fund — usually with a 10-year lifespan.
They identify and acquire businesses that fit their investment thesis — e.g., fragmented professional services (like accounting), software-as-a-service (SaaS), or recurring-revenue industries.
In accounting, the focus may be on firms or vendors that have:
- Stable, recurring fee income (tax, advisory, compliance).
- Opportunity to scale through technology or M&A.
- Strong brand equity but underdeveloped marketing or operations.
Once the deal closes, the PE firm typically replaces or supplements leadership, installs new KPIs, and plans for operational improvements.

📊 Example: BV Investment Partners acquiring Right Networks (cloud platform for accountants) to expand cloud hosting and app integrations.

2️⃣ Value Creation & Growth Phase (Years 2–6)

Goal: Improve the business to increase enterprise value.

This is the “hands-on” phase where PE adds the most value.
Common playbook:

Operational efficiency: Standardize processes, cut redundancy, and strengthen margins.
Strategic M&A (“roll-up”): Acquire smaller competitors to expand market share or geographic footprint.
Technology investment: Modernize software, analytics, and client platforms to enhance scalability and data insights.
Leadership development: Recruit executives who can drive rapid growth and institutionalize the business beyond the founder’s influence.
Revenue expansion: Shift billing models from project-based to subscription/recurring revenue.
Cross-selling: Use portfolio synergies — e.g., combining accounting tech tools with payroll, portals, or advisory services.

📈 Result: Ideally, EBITDA (earnings before interest, taxes, depreciation, amortization) grows 2–3x during this stage, often through both organic growth and acquisitions.

3️⃣ Harvest and Exit Phase (Years 5–8)

Goal: Realize a return on investment (“harvest”) by selling or recapitalizing the company.

Typical exit routes include:

Strategic sale: Sell to a larger company or another PE firm (“secondary buyout”).
Recapitalization: Refinance the company, allowing the PE fund to take cash out while retaining partial ownership.
IPO (rare): Take the company public, though uncommon in accounting services.

The exit is where PE investors “harvest” returns — usually targeting 2x–4x their initial equity investment or 20–25% IRR (internal rate of return).

📉 Reality check: Some deals miss these targets, especially if integration, talent, or market conditions underperform.

4️⃣ Post-Exit and Reinvestment (Years 8–10)

Goal: Return capital to investors and raise the next fund.

Profits are distributed to limited partners (LPs).
The PE firm’s reputation and track record determine how easily they can raise the next fund.
Many successful firms then launch a continuation fund — retaining high-performing assets and giving existing investors a choice to roll over or cash out.

📊 Example: BV Investment Partners’ 2023 continuation fund to keep ownership of Right Networks while providing liquidity to existing investors.

🔍 Why This Matters in the Accounting Industry

Understanding this life cycle explains a lot about the behavior of PE-owned firms and vendors in our space:

Stage	What You’ll Notice in a CPA Firm or Vendor
Investment	Rebranding, leadership turnover, restructuring, and new “growth” announcements.
Value Creation	Push for cross-selling, bundling, recurring revenue models, efficiency-driven staff changes.
Harvest/Exit	Cost control tightens, long-time staff exits, aggressive growth targets — preparing for sale.
Post-Exit	Potential new ownership, strategic shift, or merger into a larger entity.

🧮 Summary Table: PE Life Cycle Snapshot

Phase	Typical Duration	Primary Objective	Accounting Industry Example
Fundraising & Investment	Years 0–2	Acquire platform firm or vendor	Riverside acquiring CPA Site Solutions
Value Creation	Years 2–6	Drive growth via tech, M&A, recurring revenue	BV Partners scaling Right Networks
Harvest / Exit	Years 5–8	Monetize investment via sale or recap	Blackstone’s entry into Citrin Cooperman
Post-Exit / Reinvestment	Years 8–10	Return capital, launch new fund	Continuation funds or roll-up of assets

🧠 Key Takeaways

Private equity is not permanent capital — its goal is to grow and sell.
Every major decision (pricing, staffing, mergers, marketing) aligns with the exit timeline.
Understanding where a PE-backed firm is in its life cycle helps clients, partners, and employees anticipate strategic moves.
For accounting firms or vendors: expect aggressive growth, efficiency mandates, and potential ownership changes every 5–7 years.