Why private equity might be interested in your firm

This article was current at the time of publication.

Accountancy practices in Australia and New Zealand remain in high demand, with brokers reporting strong buyer interest and continued acquisition activity. 

Mark Emney, Co-Owner of DMY, Australia-wide specialists in selling accounting practices and bookkeeping firms, says accounting is one of the “hottest sectors” in the market today. “For every metro practice we sell, we average 80 initial enquiries [offering] sellers a diverse mix of buyers to choose from.”

In New Zealand, demand for accounting practices is also robust, notes Manoli Aerakis of MyFirm Broker, who reports over 300 registered buyers, but only a handful of listings. 

“The market is strong for acquisitions, but sellers are still unaware that they can sell their firms easily,” he says. “Some are selling their fees privately to other firms and, in nearly all cases, this means they are underselling their asset by nearly 50 per cent. 

“For example, in Auckland alone, [a firm with] a good fee base could get 1.2 times its revenue as a sale price.”

Private equity enters the fray

Private equity investment in accountancy firms is to make a dent in the Australasian market.

The practice is a US import showcased by a state-side landmark deal earlier this year, when a Blackstone-led consortium acquired a majority stake in accounting firm Citrin Cooperman, valuing the business at over US$2 billion.

In Australia, Pemba Capital Partners, an investor in high-growth, founder-led businesses, recently partnered with Stannards, a Melbourne-based professional services firm offering accounting, taxation, audit and advisory services to mid-market and high-net-worth clients, after considering more than 100 firms. 

“I believe what set us apart was a combination of cultural alignment and performance,” says Peter Angelini, Managing Director of Stannards. “It was clear that we shared common values and a similar vision.”

Also in Australia, Count Limited’s equity partner firm, Kidmans Partners, acquired the client book of Business Accounting Melbourne – a tech-forward firm known for automating and streamlining accounting processes – in 2024. Later the same year, the firm announced a second acquisition with Zanacorp, an integrated accounting and financial planning firm based in Elsternwick, Victoria.

A recently reported A$31.2 million deal by Brisbane-based growth capital firm Fortitude Investment Partners, led to it acquiring a majority stake in ASF Audits, Australia’s largest independent SMSF audit firm.

In New Zealand, the most recent PE deal, spearheaded by financial and accounting services firm Findex is a joint venture with Ortus Financial to bolster its expertise and breadth of its service. The deal will evolve Findex’s lending business into a dedicated lending-first entity with a 12-month handover period now underway.

What buyers are looking for 

Investor interest generally focuses on firms that have completed a cloud-based transformation and are positioned to convert investment into dividends, notes Aerakis, who believes investors are looking for more than just financial performance; they want to see leadership, purpose and a business building towards the future.

“From a practical point of view, having clean financials, clear governance and a well-considered growth strategy goes a long way.”

Private equity may be gaining momentum, but brokers claim that a sale to another practice is most common in Australia and New Zealand, although the profile and age of the seller is shifting.

“Forty per cent of the practices we sell now have female owners. There are also people in their 50s retiring earlier because of the strain of running a small practice,” Emney says. 

Regardless of who the buyer is, vendors must position their practices as sale-ready investment propositions.  

John McCulloch, Co-Director of Brisbane-based specialist accounting practice broking firm Quinn & Associates suggests a strong, sustainable client base – not concentrated around clients nearing retirement – experienced staff, sound cash flow management and efficient operational systems are key. 

Aerakis says, “Knowing your clients and knowing the breakdown of industries and family groups is a big plus. Who has the relationship with the client is critical — if your clients have touch points across the firm, it means they will be sticky. The biggest risk for a purchaser is the transferability of the clients.”

A broad spread of clients, not a large proportion of fees coming from a smaller number of clients, is also appealing, Jones says. “Practices focus too much on profit and, while that’s important, they need to focus more on value to a buyer.”

Chris Clifford, Co-Director of Quinn & Associates, recommends practices diversify their offerings beyond tax compliance, but admits that some old-school firms may find a buyer who sees the potential in adding business advisory services after purchase. 

Regardless of how a business is mixed, technology must be current. “Vendors may face a price reduction if a purchaser realises there’s a large amount of time and money needed to bring records and systems up to scratch,” she warns.

Aerakis agrees that having digital systems in place demonstrates a forward-thinking mindset but adds, “We don’t always have to find a buyer with the same tech stack, as nowadays it’s easy to transfer to other systems.”

What is a practice worth?

While the traditional sales benchmark in Australia once was A$1 for every A$1 of fees, valuations have shifted.

Metro practices with fees under A$1 million are now averaging 113 cents in the dollar, while those with fees over A$1 million can achieve much higher multiples — 135 cents in the dollar is not uncommon, according to Emney. 

In regional Australia, the average is 109 cents in the dollar with healthy demand from both regional and metro buyers.

Luke White, Director of Bizval – business valuation specialists – says a New Zealand firm offering business accounting including advisory services could attract a price of NZ120 cents in the dollar for that component of the business, while bookkeeping would attract 80 cents in the dollar.

“We look at the composition of the business and fees,” he says, adding that metro practices will always attract a higher offer because there are more buyers. 

From a buyer’s perspective, the best deals are typically struck with strategic buyers — accounting firms or allied businesses such as financial planners looking to expand their services.

However, McCulloch cautions that profitable growth through acquisition depends on having a clear plan. Firms should avoid buying simply because a practice appears to be a good deal or is in a desirable location. “The question is always: are they the right fit for me?” he says.

The costliest mistake buyers make is failing to conduct thorough due diligence. “Without it, initial promise can quickly become operational risk.”

Still, Clifford warns that even thorough investigations can miss key issues. “You can never find all the skeletons in the closet. It’s not until you arrive in the trenches that some things come up,” she says.