The services sector, encompassing industries such as accounting, financial services, consulting, and more, has become a focal point for private equity (PE) investment. This influx of capital is driving growth and reshaping hiring practices and executive roles within these industries. This analysis explores current hiring trends influenced by PE investments and provides insights into future expectations.
The Rise of Private Equity in Accounting and Financial Services
Private equity firms have increasingly focused on the accounting and financial services sectors. Several factors drive this trend:
- Stable Revenue Streams: Accounting firms often have recurring revenue from audit and advisory services, making them attractive investments even during economic downturns.
- Market Fragmentation: The fragmented nature of the accounting sector presents opportunities for consolidation and economies of scale.
- Growth Potential: PE firms see opportunities to expand service offerings, invest in technology, and drive operational efficiencies.
- Regulatory Complexity: Increasing regulatory demands create opportunities for specialized services, driving growth potential.
Since 2021, there has been a significant surge in PE investments in accounting firms. According to Alvarez & Marsal, many accounting firms are being acquired as PE investors recognize their potential for stable returns and operational improvements. This trend is expected to continue, with reports indicating that as many as 10 of the 30 largest US accounting firms could soon be owned by PE firms.
Current Hiring Trends in the Services Sector
- Increased Demand for Specialized Roles
Private equity investments have led to a surge in demand for specialized roles in areas such as financial analysis, risk management, and operational improvement. As noted by Bain & Company, the business services sector has been among private equity’s most active hunting grounds due to its technology-enabled growth trends and chronic talent shortages. - Strategic Leadership Positions
As PE firms aim to maximize returns, there is a heightened focus on strategic leadership positions such as Chief Financial Officers (CFOs) and Chief Operating Officers (COOs). These roles are crucial for driving strategic initiatives and ensuring alignment with PE objectives. - Professionalizing the revenue function continues to increase in focus/popularity within PE-backed services businesses. Often via the creation of new titles like Chief Revenue Officer [“CRO”] or Chief Commercial Officer [“CCO”] private equity continues to push for more technology-enabled sales metrics, marketing-assisted lead generation, and stronger digital customer acquisition.
Forecasted Expectations for 2025
- Continued Growth in Financial Services
The financial services industry is expected to see continued growth driven by digital transformation and regulatory changes. This will likely lead to increased hiring for roles focused on compliance, digital strategy, and customer experience management. - Expansion of Consulting Services
As businesses navigate complex market dynamics post-pandemic, consulting firms backed by PE are expected to expand their offerings. This will create opportunities for consultants with expertise in digital transformation, change management, and strategic planning. - Focus on Talent Development
With an eye on long-term growth, PE-backed service companies will increasingly focus on talent development programs aimed at nurturing future leaders within their organizations. Both to improve company performance but also enhance bench strength of succession candidates that usually bolsters sales multiples on change-of-control/ultimate company sale to next owner(s). Talent development can come in many forms, including executive learning & development, individual executive coaching, and team-based coaching.
How Service Companies Should Plan for Hiring
Given these trends, service companies need to adapt their hiring strategies to stay competitive:
- Develop Comprehensive Talent Strategies: Align hiring practices with long-term business goals and PE objectives that have a relentless focus on “improve existing leadership or move them out and replace with higher performers”
- Combine team coaching with implementation of a “company operating system” like OKRs (objectives & key results, see https://www.whatmatters.com/faqs/okr-meaning-definition-example for more), EOS (Entrepreneurial Operating System, https://www.eosworldwide.com/ ) or similar company goals setting and accountability and measurement systems down to the department & employee led by an external company coach
- Leverage Technology in Recruitment: Use AI-driven tools to streamline recruitment processes and identify top talent efficiently.
- Invest in Employee Development: Create robust training programs to upskill employees and prepare them for leadership roles.
- Adapt to Remote Work Trends: Offer flexible work arrangements to attract top talent from diverse geographic locations.
By understanding these trends and preparing strategically, service companies can position themselves to attract and retain top talent in an evolving market landscape shaped by private equity investments.