Talking points
- To capitalize on a more active mergers and acquisitions (M&A) environment, private equity (PE) firms should consider focusing on increasing the value of each acquired portfolio company.
- For enhanced returns, the finance and accounting operations of each acquired company should improve, not diminish, company value.
- Deloitte’s opening balance sheet and valuation services tailored to smaller portfolio companies can help provide efficiency.
Finally—after two down years, the IPO market is growing again, with the number of US IPOs increasing 72% during the first half of 2025 compared to the same period in 2024.1 Robust IPO activity often accompanies a more active M&A environment due to greater available capital , increased valuations, and strategic opportunities. This is what we saw through the first seven months of 2025, with the value of global M&A deals reaching $2.6 trillion, the highest for the first seven months of the year since the boom of 2021.2
What could a more active M&A environment mean for midsize PE firms ? It can create the opportunity to drive higher returns by enhancing the value of each transaction. Achieving this success, however, often depends on managing the finance and accounting operations of each acquired portfolio company to increase company value.
Impact of finance and accounting on portfolio company value
In our work with PE firms, Deloitte sees various finance and accounting-related challenges for midsize PE companies trying to enhance portfolio company value. They include:
- Lack of visibility into the accounting operations of the newly acquired portfolio company during fast-moving M&A transactions.
- A lean portfolio company finance department that lacks a strong technical accounting background.
- Lack of an established quick close process at the portfolio company, which can result in extended timelines for purchase accounting, and drive delays and risk of errors in monthly reporting to the PE.
Finance and accounting surprises during and after private equity acquisitions can be more than mere inconveniences; they’re potential roadblocks on the path to value creation. A typical work-around requires the portfolio company to either engage expensive service providers or reallocate PE firm team member hours to help meet reporting requirements and bring accounting compliance up to relevant standards. While these solutions may be less challenging for larger PE firms and portfolio companies to access, they can be complex, time-consuming, and costly for small and mid-tier companies.
Tailored to smaller PE and portfolio companies
Fortunately, evolving technology has simplified opening balance sheet, purchase price allocation, and valuation services, making them more accessible to smaller companies. Deloitte combines experienced specialists with proprietary diagnostic technology and templates designed to provide these services more efficiently. This approach can help smaller portfolio companies address accounting, audit, and management reporting requirements more easily and cost-effectively, while providing insights on accounting policies to PE firms.
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