Six Key Trends Professional Services Firms Should Seize to Capture Share in the Private equity Sector

Although the pre-pandemic strength of private capital markets put private equity firms in a strong position to weather the current cycle of economic upheaval, these same firms are now witnessing deflated valuation, longer dealmaking cycles, and limited access to capital and financing. Despite these challenges, investors expect the market to stabilize soon, and private equity firms are shifting focus and fine-tuning strategy both to prevail and prepare for the flood of business when the market rebounds.

For other professional services providers — including law, accounting, and management consulting firms — the current shifts within the private equity firm sector present incremental business opportunities. New survey results reveal how professional services providers can successfully adapt service offerings to better align with the needs of private equity clients, and expand matters and engagements during these unprecedented times.

Implications for Legal Services Providers

1. In the recent Intapp Strategic Consulting market brief, COVID-19: Business Impact on Law Firms, we projected that — due to the pandemic — various practices supporting the capital markets industry would drive shifts in demand for legal services. The Intapp COVID-19 Law Firm Pulse Survey confirms that law firms are already experiencing amplification in some of these practices. As private equity firms continue to recalibrate, there is continued growth potential for these practice areas. Specifically, 52% of private equity firms plan to focus on acquiring new companies and/or rolling up or bolting on to an existing company. Additionally, 38% of investors believe that new origination opportunities will come in the form of recapitalization. This presents a clear signal to law firms of potential demand in practices like banking and finance, as well as typically countercyclical practices, like corporate and M&A — optimistically, an uptick in work for corporate and M&A into Q2 could be an early indication of recovery and confidence the legal market needs.
2. More than 20% of investors believe the biggest increase will come from founder sales, and another 29% will come from corporate carve-outs. This news not only presents an opportunity for law firms to work with private equity firms, but also allows for law firms — in a trusted advisor capacity — to reach out to founders and corporate clients who may seek opportunities from private equity buyers.
3. COVID-19 has presented serious tax and regulatory implications with respect to doing business in this new socially distanced environment. New opportunities and restrictions seem to be surfacing daily, making changes difficult to track and even more difficult to navigate. Considering the challenges private equity firms face, unclear regulations and tax outlooks present an opportunity for professional services work in tax and regulatory practices. Firms are realizing this potential; for example, Stinson LLP, Winston & Strawn, and WilmerHale have added COVID-19 taskforce teams to address pandemic-specific needs; others, like Crowell, have created digital resource centers. These actions help to deepen firm’s relationships with clients — essential during this time — and also puts firms in the best position to win work when it comes. The findings from the DealCloud Dealmaker Pulse Survey reinforce a need in the market for firms to place special focus on the private equity industry to anticipate work and capture wallet share.

Implications for Accounting and Management Consulting Services Providers

4. Pandemic-related tax and regulatory implications mentioned above also equate to work for accounting firms who advise dealmakers about considerations and implications of a deal. This opportunity also has legs in the management consulting sector, as private equity firms need expert advice on regulations with respect to logistics and supply chain as well as workforce management, as market dynamics change.
5. Nearly 10% of private equity firm respondents believe that their management teams lack the necessary skills to guide the company through the pandemic — a clear opportunity for management consulting firms to show value by offering specialized support to dealmakers.
6. The implications for work created by COVID-19 for accounting and management consulting boil down to helping create test scenarios and plans for private equity firms, as well as founders and corporations looking to the capital markets for opportunities. These parties will need to understand the various implications of what is to happen depending on the varying timeframes of returning to normalcy. It also means helping firms navigate reopening, and — for those with a global footprint — how plans play out in different locales. Private equity firms, founders, and corporate entities will need creative solutions that help them understand the consumer industries in which they are looking to play. The DealCloud Dealmaker Pulse Survey highlights a clear opportunity for accounting and consulting firms to pivot and focus on new work during an otherwise slow period.

In a muted market — now more than ever — private equity firms are turning to nontraditional sources as they seek opportunities, introductions, and deal flow. Lawyers, accountants, and consultants are poised to take on roles as trusted advisors to help private equity firms survive and thrive in the new normal. The winners in this environment will be professional services firms that nurture relationships and tailor service offerings to match the needs of the times. The recent findings of the Intapp Dealmaker Pulse Survey highlight the specific opportunities available to professional services providers, and help them get a leg up on pivoting and refocusing — both in the ways they work and how they serve their clients.

For more details on survey findings and highlights, access the DealCloud Dealmaker Pulse Survey Report.