Private equity leaders warn AI could hit law and accounting firms

In short: Private equity and credit investors say fast-improving AI could disrupt law, accounting, and consulting businesses that charge by the hour.

What's going on

Private equity firms, which buy companies and try to improve them before selling, have invested billions in professional services like accounting, consulting, and legal support. At the SuperReturn conference in Berlin, several industry leaders said these businesses may be more exposed to AI than many people expect.

They pointed to “generative AI,” which is software that can create text and other content (like a very fast junior worker who can draft and summarize). Kevin Marchetti of Man Group said AI could affect work such as claims auditing, billing automation, proxy voting management, and legal services.

Some investors said they are already avoiding new deals in certain “white-collar” service firms because future revenue is harder to predict. Joana Rocha Scaff of Neuberger Berman said writing, translation, and legal services could be especially vulnerable. The risk is bigger for firms that bill by “man hours,” since AI can reduce how many hours are needed (like switching from hand-washing dishes to using a dishwasher).

The Financial Times noted that shares in Accenture have fallen by almost half in the past year, which signals investor worry about the sector.

What to watch

Investors drew a line between services that are regulated and those that are not. Apax Partners said basic bookkeeping billed by the hour looks exposed, while regulated audit work may hold up better because clients pay for an official sign-off, not just time spent. A key question is whether smaller firms can afford and use AI well enough to compete with giants like KPMG.

Source: Financial Times