There is a cynical version of the Golden Rule that says, "He who has the gold makes the rules." Like many cynical ideas, it contains more than a grain of truth — enough, at least, to make it worth bearing in mind whenever questions of money and control are in play.
And make no mistake: Accounting is just at the beginning of a great experiment around money and control, as private equity firms flood into the profession, leaving the door open for an even larger pack of potential acquirers, drawn equally to accounting firms' steady earnings and their potential for growth.
In many ways, this is great for accounting, but it also brings with it certain risks, not the least of which revolves around who will end up in charge of the accounting firms of the future, and whether they will share the same priorities and public calling.
As a profession with a strong sense of integrity and responsibility, and a clearly defined public service mission, accounting is not just any run-of-the-mill industry that can be casually consolidated and expected to put the bottom line ahead of its duties to its clients and to the public. As a cautionary tale, Barry Melancon, the head of the American Institute of CPAs, has pointed in particular to the medical profession — and its less-than-happy experience, in terms of both doctor and patient satisfaction, with the large-scale consolidation of individual medical practices into larger medical services providers.
None of this is to suggest that selling stakes to nonaccountants will unavoidably dilute the profession's role as trusted advisors and guardians of the capital markets. Thus far, the private equity firms that have bought accounting firms seem to understand and value that unique role, and many of those who look set to follow are in a good position to do the same. Wealth managers, for instance, with their commitment to their fiduciary duty, share at least some of accountants' strong concern for their clients. And employees who gain a stake through employee stock ownership plans can, one hopes, be trusted to understand and preserve what sets CPA firms apart from, say, hardware stores or dry cleaners.
Still, a certain vigilance is called for; often enough, those who have the money really do expect to make the rules, and if CPAs aren't careful as they enter these deals to defend what sets them apart, both parties may find themselves disappointed in the long term, as they erode the distinctions that made the deal attractive in the first place.
To join the discussion about these and other questions surrounding private equity in accounting, join us Nov. 20-21 in Chicago at our
