There is a significant amount of M&A activity in the accountancy sector, and we have been fortunate to be involved in this space continuously since 2018.
This industry is ripe for M&A due to its relationship-driven nature, making it challenging for businesses to switch from one accountant to another. As a result, it is a relatively sticky environment, which adds to its attractiveness for investors.
When we refer to accountancy, we mean B2B accountants—those who primarily serve entrepreneurs and businesses.
Areas of Accountancy M&A Activity
There’s a lot of value in tech due diligence within services firms and accountancy offers a broad level of firms to invest or buy, These are some areas we’ve worked in in the past:
- Accountancy Practices – Traditional accounting firms providing financial services to businesses and individuals. Many acquisitions focus on expanding regional presence or consolidating expertise.
- Accountancy Software – Platforms that enable businesses to manage their finances, bookkeeping, tax, and compliance more efficiently. Cloud-based solutions have seen a surge in demand.
- Accountancy-Related Services (e.g., Payroll) – Services that support core accounting functions, such as payroll management and tax filing, often acquired to offer a more comprehensive service package.
- Accountancy Hosting – Secure, cloud-based hosting solutions that allow accountants to access and manage client data remotely while ensuring compliance with data protection regulations.
- Accountancy Management Service Providers (MSPs) – Firms that offer IT support, cybersecurity, and infrastructure management specifically for accountancy businesses, ensuring seamless and secure operations.
While the firms being acquired vary widely in type, they often interrelate. The investment thesis behind these acquisitions typically involves expanding into new verticals, cross-selling services, and leveraging automation to enhance efficiency and profitability.
Core Due Diligence Areas
For all of these businesses, the bare minimum assessments include:
- Cybersecurity – Evaluating the robustness of security measures to protect sensitive client data from breaches and cyber threats.
- Data Management – Assessing how firms store, process, and secure financial data, ensuring compliance with industry regulations and best practices.
- IT Infrastructure – Reviewing the underlying technology stack, including cloud services, servers, and software integrations, to ensure scalability and reliability.
- Back-Office Systems – Examining internal processes, automation, and workflow efficiencies to identify potential bottlenecks or opportunities for streamlining operations.
Industry-Specific Areas of Focus
Beyond the core assessments, there are industry-specific areas that need particular scrutiny:
- Automation Technology vs. Human Professional Services – Evaluating the degree to which firms automate tasks versus relying on human expertise.
- Business Management Systems – Examples include practice management software and workflow automation tools.
- Core Accountancy Platforms – Such as CCH, Xero, and Sage, which underpin accountancy operations.
- Integration & Automation of Order-to-Cash Systems – Assessing how efficiently firms handle billing and payments.
- Data Uploads & Customer Interaction – Understanding how client data is transferred and managed, especially regarding compliance and security.
Given the scale of data transfer in this industry, data security is a critical concern. More mature firms have dedicated platforms for client data ingestion, while others still rely on email, which presents significant GDPR compliance risks.
IT & Security Considerations
With the widespread shift to remote work and laptop-based operations post-COVID, we assess how core systems are accessed and whether they are centralised effectively. A well-integrated and cost-effective IT environment enhances the overall value of an acquisition. If integration proves complex and expensive, it can erode the expected benefits of the transaction.
Many smaller firms are managed by IT MSPs, resulting in vast discrepancies in IT quality and security. For this reason, we always conduct an outside-in assessment to evaluate security posture. For instance, in just the past week, we assessed two accountancy firms—one had a pristine security setup, while the other had glaring vulnerabilities that allowed unauthorised access to in-house systems.
Conclusion
Nowadays failing to prioritise customer data protection is not an option. Since most accountancy firms are privately owned, security and compliance often come down to the management team’s attitude and commitment to safeguarding client information. These acquisitions tend to be small but could create a
Ensuring robust security measures and seamless integration capabilities is key to deriving long-term value from any acquisition in this space.
