IFAC Report: Private Equity Investment in Accountancy – Key Takeaways for Firms

Private equity (PE) investment in accountancy firms has been a hot topic, particularly in the US, but the phenomenon is far from isolated. According to a recent report by the International Federation of Accountants (IFAC), PE activity is gaining momentum globally, with notable activity in continental Europe, the UK, and the US. In this post, Melisa Galasso highlights the most important insights and practical considerations from the IFAC report, helping accountancy professionals make informed, strategic decisions in an evolving landscape.

Understanding the Global Landscape

Engagements between PE asset managers and professional accountancy firms have increased significantly since 2022, with robust growth in both direct and indirect (roll-up) transactions. The IFAC task force, comprising volunteers who analyzed data and engaged with key stakeholders, emphasizes that while local differences exist, the core concerns and best practices transcend borders.

Transaction Structure: Balancing Private and Public Interests

A well-structured administrative service agreement is essential to ensure a proper relationship between the PE investors’ commercial interests and the firm’s public interest responsibilities, especially in areas like audit and assurance. Melisa Galasso notes that quality firm leadership must take active responsibility to ensure PE involvement does not undermine the delicate balance between profitability and professionalism.

Firm Oversight and Early Engagement

Proactive engagement with regulators, oversight bodies, and network peers is vital both before and after PE investment. Early dialogue:

• Identifies potential issues

• Provides comparative insight

• Establishes a foundation for cooperation

Utilizing third-party advisory services and legal experts should be carefully considered. Firms with strong leadership, an ingrained culture of professionalism, and experience under regulatory scrutiny are often best positioned to benefit from PE relationships.

Independence, Ethics, and Managing Conflicts

Independence and managing conflicts of interest remain at the forefront. PE investment may influence firm culture, but it does not reduce the ethical obligations to act with integrity, objectivity, and prioritize the public interest. Frameworks like the IESBA Code—and in the US, proposals by the Professional Ethics Executive Committee—provide essential guidance for maintaining ethical standards.

For success:

• Discuss and agree on approaches to independence and conflict management before engagement terms are finalized

• Remember that PE involvement cannot override what makes the profession unique: its public trust and the integrity behind its brand

Audit Quality and Continuous Improvement

Regardless of ownership, audit quality, ethics, technical expertise, client focus, regulatory oversight, and responsibility to the public interest must remain non-negotiable. Melisa Galasso advises that firms should consistently review and update quality management frameworks post-investment to ensure standards are not compromised for efficiency or budgetary reasons.

Market Impacts: Competition, Consolidation, and Attractiveness

PE investment is fundamentally about scale and growth. The data suggest a trend toward market consolidation, likely resulting in fewer—but larger—accountancy firms in the future.

Importantly, not all PE investors are alike. Alignment of culture, perspective, and growth strategies between investors and firms is critical. Leadership should agree on the investment thesis and have a clear strategic plan—including considerations for future secondary sales—before entering into any transaction.

Final Thoughts

Embarking on the PE path is not a decision to be taken lightly. As Melisa Galasso summarizes, firms must carefully weigh numerous factors, from structural and cultural alignment to maintaining the profession’s core values.

For those interested in a deeper dive, the IFAC report provides extensive country-specific and data-driven insights—the link is included in the original video. As PE investment continues to reshape the accountancy profession, informed, ethical decision-making will ensure firms remain resilient, future-ready, and committed to serving the public interest.