It’s almost like private equity firms are using the Inside Public Accounting rankings of largest accounting firms as a shopping list.

In 2021 and 2022, PE firms bought stakes in EisnerAmper (18th largest by revenue), Citrin Cooperman (23rd), and Cherry Bekaert (26th).

Then in February, Hellman & Friedman and Valeas Capital Partners bought a reported majority stake in Baker Tilly (10th largest).

This spring’s announcement concerned the highest-ranking CPA firm yet: New Mountain Capital said they’d be buying a stake in Grant Thornton, which reported $2.4 billion in revenue for the fiscal year ending July 2023 and, at No. 7 on the IPA rankings, is smaller than only two firms outside the Big Four.

Adding it all up: PE firms have bought stakes in five of the top 26 US accounting firms in less than three years.

Now that one has bought the seventh-largest CPA firm, could private equity go for the sixth- and fifth-largest, BDO and RSM? Allan Koltin told the Journal of Accountancy last year that “more than half” of the top 20 firms are discussing deals “[involving] private equity.”

Click here for more on PE’s acquisition of accounting firms.—GD

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We could keep telling you that AI is going to fundamentally change financial professions—or you could take it from someone right at the source, like Richard Jackson, an assurance partner at Ernst & Young.

EY has already started using AI tools in the audit process—and Jackson’s insights might help you or your organization as you consider similar investments.

Jackson started his career at EY in the 1990s in the UK, but he said the lure of “this mythical place called Silicon Valley” brought him to California, where he’s worked with technology clients ever since.

“I’m strongly of the belief that we’ll see more change in the next five to 10 years in this profession than we’ve seen in the last 100,” Jackson told CFO Brew. “That’s hugely energizing for any CFO that’s trying to lead, encourage, and motivate their own organization.”

He notes that while AI exploded into the public consciousness within the last year or so, EY had already been in internal talks for years to determine the best way to deploy the emerging tech. Since those early conversations, Jackson said the emphasis has always been on ways to make work easier for people, rather than replacing their jobs.

“It’s about using that technology and automation to help create more time and space for the auditor to apply their judgment, experience, knowledge, and expertise,” he said.

Click here for more on how AI is impacting audits.—NP

We hate to be the bearers of bad news—so actually, we won’t be. We’ll let the analysts at Gartner do the dirty work.

“By 2027,” they said in a news release, “weak demand and rising costs will shrink earnings before interest, taxes, depreciation, and amortization (EBITDA) margins by more than 30% relative to 2022.”

To be even more direct, as they were with clients in a December report, “CFOs will have to grapple with substantially reduced profitability” in 2024, 2025, and 2026.

Yeesh. Glad we’re not the ones telling you this—especially because there’s more. “Most companies will be unable to deliver the profitable outcomes investors have come to expect across much of the last decade,” the consulting firm wrote, “as the convergence of low rates, suppressed wages, and steady economic growth that enabled those results no longer exists.”

In the place of cheap debt, cheap workers, and solid growth, Gartner said CFOs should expect labor costs to grow more than twice as fast as GDP in advanced economies, and tech costs to grow four times as fast.

The analysts also predict that consumers will be spending less after taking on too much debt, and noted, in the report for clients in December, that the effects of climate change will tack 10% onto enterprise structural costs by 2028.

What is the future of profits? Click here to explore more.—GD

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