AI to end billing by the hour at accounting firms as private equity changes ownership, says Eisner Advisory CEO Charles Weinstein

Mumbai: Private equity (PE) is changing the ownership of professional services firms, while artificial intelligence (AI) is set to transform how they deliver and price their work, resulting in a shift that could reconfigure the competitive landscape for the top firms and create new opportunities for India, said Charles Weinstein, CEO of Eisner Advisory Group LLC, the advisory entity of US professional services firm EisnerAmper.

"Privatme equity changed the ownership model of accounting firms and AI is going to change the business model," Weinstein told ET in an interview. In the long term, twin shifts could drive consolidation in the sector and even change the economics of professional services, he said.

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Industry watchers estimate that in the US, a third of the largest firms outside the Big Four have attracted PE investment or have been acquired by such investors in the past three years, and this trend may also unfold in highly fragmented markets like India.

EisnerAmper, which began its India operations in 2006, has expanded its team to about 1,100 people, supporting its global assurance, tax, advisory and outsourcing businesses.

"India provides a cost advantage, but its greater value lies in the availability of talent and the capacity to support growth," Weinstein said. "The firm has expanded from six people in India to about 1,100, with tax expected to become a bigger service line and advisory capabilities being built out."

EisnerAmper raised capital from TowerBrook Capital Partners in 2021, becoming one of the first large US accounting firms to adopt the model, with Weinstein arguing that the profit motive of private equity does not inherently conflict with the principles of the profession. "We operate much more efficiently today than we ever have," he said. "There is no reason why you can't be profitable and ethical. They don't conflict with each other."

The PE investment has also fuelled an aggressive acquisition strategy, a model that several professional services firms in India are now looking to replicate.

EisnerAmper has acquired 30 businesses in five years, expanded its service offerings and expanded its partnership from 200 members when it took private equity capital to 475 today. Consolidations in the US mid-market professional services segment could be a blueprint for India too, as the Big Six dominate major assignments and mid-sized firms struggle to scale up. As AI and private equity take off, Weinstein expects the old partnership model to face more pressure, with firms turning to outside capital to fund technologies, acquisitions and new service lines.

With auditor independence, conflicts of interest and regulatory scrutiny becoming increasingly complex, Weinstein believes a separation of audit and consulting businesses at some of the largest firms is inevitable, though the timeline is difficult to predict.

EY's Project Everest, an attempt to split its audit and consulting businesses, ultimately failed.

"If one goes, they all go," he said, suggesting that competitive pressures could make it difficult for one firm to change its structure while the others retain their existing models.

While private equity is changing the ownership structure, Weinstein sees AI as the bigger force reshaping the way professional services are delivered and monetised.

"For how many years were professional services in accounting firms sold by rates and hours? Forever, but not anymore," he said. The change will force companies to charge for outcomes, not for the time it takes to achieve them. That willingness to experiment will become even more important as the pace of disruption accelerates.