The M&A market for small and medium-sized accountancy practices (SMPs) in Asia Pacific is showing signs of a little heat, with consolidation and private equity (PE)-backed activity potentially reshaping the sector.
Singapore-based Tim Underwood, a managing director at M&A consultants Foulger Underwood, notes activity in domestic acquisitions, driven by succession issues and defined by ageing partners, poor planning and a weak talent pipeline.
‘Fewer managers and family members are looking to take ownership; meanwhile, junior professionals either want to enter commerce directly or get a big-name professional services brand on their CV before heading into commerce, making them difficult for SMPs to attract,’ says Underwood.
‘Partners are selling, and from weaker positions than if they’d planned properly’
‘So, with no one to replace them, partners are selling, and from weaker positions than if they’d planned properly. This consolidation is likely to continue and gain momentum over the next five years.’
Cost concern
Terence Ang, partner and head of advisory at RSM Singapore, expands on the consolidation theme: ‘Practices are generally facing rising operational costs, talent shortages and the increasing demand for skills and expertise beyond traditional accounting services, such as the development of digital solutions and ESG advisory services.
‘In practice, these M&A drivers in the region are seeing larger accounting firms acquiring smaller SMPs to remain competitive, diversify their services and reduce operational costs by pooling resources.’
‘The need to invest in new technologies is pushing smaller firms to merge’
Siong Yoong FCCA, founder and CEO of Vallaris Deal Advisory in Singapore, also highlights advances in technology and SME client growth as key M&A drivers. ‘The need to invest in new technologies and digital transformation is pushing smaller firms to merge with larger ones that have the necessary resources, while the growth of SMEs in the region is driving demand for accounting services, prompting firms to consolidate to better serve this expanding client base.’
Yet at the smaller level, expansion remains challenging. SMPs often can’t simply go and buy a firm to differentiate themselves; they need to hire in the expertise. But wage growth over the past few years has made this tough.
Many firms are likely to derive most of their revenue from the small ecosystem of traditional services: bookkeeping, tax advisory, audit, assurance, corporate secretarial, payroll, and compliance. And this at a time when non-audit services are seeing increased competition from the big corporate service providers.
Vibrant space
The mid-to-large tier, meanwhile, is seeing more regionally expansive activity and fiercer competition for non-audit services, with PE-backed M&A creating a vibrant space in which challengers are emerging to take on the established global professional services players.
‘PE in Europe and North America is focused on the accounting and CPA space, while in Asia Pacific it’s the corporate service space, which is everything apart from audit,’ Underwood says. ‘They’ve gone after this opportunity to service clients on a multi-jurisdictional basis, which means acquiring firms with offices in eight, 10, 12 markets, and then helping to grow those markets through further M&A.’
To illustrate the process, Siong Yoong highlights the recent PE-backed journeys of InCorp Global and EisnerAmper. Having been bought by TA Associates in 2021 then sold to Hillhouse Capital in 2024, InCorp has grown organically by expanding its network and service capabilities, and inorganically through M&A. It’s now present in Singapore, Australia, Hong Kong, India, Indonesia, Malaysia, Philippines and Vietnam.
‘PE firms are increasingly showing interest in consolidating SMPs across the region’
In 2021, EisnerAmper received investment from TowerBrook Capital Partners, providing the firm with additional resources to further its expansion efforts. EisnerAmper’s Asia Practice Group continues to coordinate services for Asian individuals and enterprises investing and doing business in the US. This includes wealth advisory, tax services and advisory services for private equity and hedge funds.
‘TowerBrook’s investment in EisnerAmper will facilitate strategic M&A, allowing it to expand its footprint in key Asian markets, helping the firm establish a stronger presence and offer more localised services,’ says Siong Yoong, ‘while strategic investments and acquisitions have positioned InCorp as a leading provider of corporate services in the region.’
Bolt-on acquisitions
Ang suggests that the majority of recent M&As among SMPs in ASEAN involve PE firms or PE-backed larger SMPs acquiring smaller firms as bolt-on acquisitions. ‘PE firms are increasingly showing interest in consolidating SMPs across the region, with a focus on establishing a global or regional multi-service platform,’ he says.
‘M&A activity is proving particularly strong in markets where talent is scarce’
‘In addition, larger SMPs may also be seeking consolidation across the region, acquiring access to talent, expertise and a client base that solidifies the practice’s market position. M&A activity is proving particularly strong in markets where talent is scarce, allowing firms to acquire much-needed human capital.’
Ang expects this PE-backed trend to continue, alongside SMPs acquiring non-accounting companies as they seek to diversify into advisory services beyond traditional audit, tax and accounting.
‘Key targets for M&A may include advisory firms offering sustainability advisory, digital consulting, cybersecurity and data analytics,’ he says. ‘Additionally, we may start to see the rise of regional firms across ASEAN as more companies are increasingly expanding globally, or consolidating their regional footprint. For SMPs, offering capabilities through global or regional platforms remains key to their growth opportunities.’
More information
Visit Practice connect, ACCA’s dedicated SMP hub for resources and support.
