In this episode of The Woodard Report podcast, sponsored by Expensify and Fyle, hosts Joe Woodard and Bob Lewis discuss the major mergers and acquisitions (M&A) trends shaping the accounting industry.
Lewis explains how private equity (PE) firms are acquiring large accounting practices, aiming to rapidly expand them through further acquisitions. He notes AI and other technologies enabling increased automation and advisory services. PE valuations are 50-100% higher than traditional sales. While not all firms want PE ownership, it is impacting the whole sector.
The rise of client accounting services (CAS) is another driver of M&A. Lewis sees CAS becoming the largest service line for many firms as they shift compliance work to CAS and focus more on advisory. The recurring CAS revenue also helps smooth seasonal revenue swings.
For small firms, Lewis recommends getting to $1 million in revenue with minimum $1000/month clients. Strong systems and intellectual property are appealing, not just client books. He advises being selective about ideal clients using tax return data. Non-credentialed staff should elevate skills to controllership services.
Overall, they predict an industry reshaped by CAS, automation, and consolidation via M&A. Credentialed and non-credentialed professionals must embrace new skills to remain relevant.
Listen to the full episode for more insights on the accounting industry trends and how to prepare your firm. Subscribe to The Woodard Report podcast on your favorite platform to stay up to date each week.