“History doesn’t repeat itself,” Mark Twain said, “but it often rhymes.” At the risk of ruining a beautifully streamlined aphorism, it’s worth noting that history also echoes, with distorted repetition instead of the clean recurrence of a rhyme.
One of the upsides of having covered any field for a long while is the ability to see history come around again, either as rhyme or echo. The latest recurrence I’ve noticed is the entry of private equity firms into the profession, offering capital in return for a stake, or to set up separate ventures with accounting firm partners. While still a relatively new trend, it has already involved several Top 100 Firms, including EisnerAmper and Schellman & Co., and experts predict we’ll see many more this year.
Much of the deal language, and the splitting of accounting firms into attest and nonattest units, put me in mind of an earlier time — the late 1990s, to be specific, when “consolidators” from outside the accounting profession roamed the landscape, snapping up firms left and right with the expectation of creating nationwide business services providers. Led by the likes of American Express Tax & Accounting and HRB Business Services, they regularly split up firms into attest and nonattest groups (the famous “alternative practice structure”), and for a while they made the weather in accounting. Within a few years, though, they faded entirely from view, as closer experience of the accounting field and changes in the economy led to less interest on the part of outside money. They left almost no trace in the profession, with the honorable exceptions of CBIZ/MHM and UHY Advisors, and (perhaps less honorably) a taste for M&A in the field.
I don’t know if private equity’s interest in accounting firms will be a rhyme or an echo — the deals thus far seem very carefully structured, and the trend is still in its early days, far from the frenzied pitch that the consolidation trend hit. To be fair, it might be neither: It could be the start of a permanent new feature of accounting, with firms regularly and successfully partnering with private equity on new ventures. But for anyone coming into accounting from the outside, a review of the late 1990s is certainly in order.
The recent acquisition of AccountantsWorld — a longtime player in software for accountants, and a pioneer of the cloud — by the U.K.’s IRIS Software reminded me of a similar trend from the same period that we might hear echoing or rhyming in the not-too-distant future. By the end of the 1990s, there were a dozen or more serious competitors making accounting software, and a similar number providing tax prep packages. By, say, 2004, most of them were gone, after an orgy of acquisitions that saw most of the packages rolled up into just a handful of major product lines, often leaving orphaned users forced to adopt new software.
With the cloud lowering barriers to entry, the last decade has seen an ongoing flowering of cloud-based accounting software packages, to say nothing of an exponentially larger mushrooming of accounting and finance-related apps, with the last several months alone seeing a veritable flood of funding rounds by startups in the field. As the larger accounting platforms embrace the ecosystem model, they may see less need for outright acquisition, but I wonder if, in the next few years, there might be an echo or a rhyme in the form of market consolidation.
To be clear: These are not predictions; they’re just musings on the potential paths history can take. I’d be curious to learn where you hear echoes and rhymes in the history of the profession — and not just around M&A. Are there trends in management, recruiting, client services or innovation that you see recurring, or that you’re afraid will recur? Let me know at
