Unlike the majority of CEOs in my industry, my background isn’t in accounting. I spent 15 years of my professional career buying and selling my own companies, as well as advising others on how to do the same.
Over the years, I learned that no industry is immune from M&A activity. And although the professional services industry is no stranger to M&A, it has never been more ripe for investment – we’ve seen our way through a global pandemic, a recession and labor shortages and, yet, have watched the industry remain very strong.
Our business isn’t constrained by geographic barriers – our professionals and clients can live and work anywhere, while still being able to connect and collaborate. Top firms boast expertise across many industries, as well as strong clients and top-notch talent around the world. And these firms are locked in a fierce race to the top. Acquisitions are one of these firms’ key avenues of growth.
Leading professional services organizations, private equity firms and capital investors have their eyes set on small- to mid-sized consulting firms – and in a competitive marketplace, it’s either acquire or be acquired.
Investors in professional services
The professional services industry has long appealed to investors and private equity firms. As professional services firms navigated through the storms of the last few years to present, that appeal grew. Add to this the shifting labor market, supportive market conditions and the ability to play the role of a key investor, and it’s clear why investors are eagerly circling the industry.
Further, accounting firms are largely partner-owned, meaning money spent/invested is that of the individuals in the partnership. Bringing in an outside investor provides capital to a business that did not come directly from the partners of the organization. This is attractive, as it is capital that can be spent now, and it’s capital that puts a company at an advantage over the competition. If our industry plays out the way I anticipate it will, organizations will need not just historical levels of growth capital, but rather significant capital investments to grow aggressively.
Trends in the industry
Investors are captivated by our industry. We’re seeing more investment from institutional capital into professional services firms and, in turn, expect to see a growing number of accounting firms become publicly traded in the near future. Additionally, larger firms are committed to being acquisitive to strengthen their service offerings, expand their geographic reach and drive additional earnings.
Professional services business owners are deciding whether they’re ready to take on outside capital – and if they aren’t, they’re likely trying to determine if M&A is a viable option. In some instances, companies will acquire or sell portions of their business to concentrate on particular segments. Other times, businesses will seek expedited growth they can’t obtain organically in the same span of time. Regardless of a company’s next step, they’ll need to take one; doing nothing is not an option.
At Sikich, we’ve added new services and expanded across industries and geographies through acquisition over the past decade. And we aren’t slowing down any time soon. We’ve built a foundation for growth, where our culture, clients and service offerings appeal to other professional services firms that want to grow with a leading organization. We’re looking at the future with ambitious goals to seek expansion and evolution in an innovative industry.
The future of professional services
Competition is stiff in the professional services industry, and we know we’ll face our share of challenges. We’ve set our bar high to align with what I believe to be the most extraordinary time in our industry. Deals will persist, and firms will have to make a decision: acquire or be acquired. Fortune favors the bold!