{"text":[[{"start":10.8,"text":"Law and accountancy are among the businesses most vulnerable to AI disruption, top private capital executives have warned, adding to the worries of buyout groups that have invested heavily in professional services. "}],[{"start":22.200000000000003,"text":"The rapid development of generative AI has already hit the valuations of software businesses but private equity and credit investors told the FT that asset-light advisory businesses that bill by the hour were also at serious risk."}],[{"start":36.650000000000006,"text":"“Software has dominated the headlines but AI goes so much further,” said Kevin Marchetti, chief investment officer and head of US direct lending at Man Group. “Claims auditing, billing automation, proxy voting management or legal services . . . you could really foresee how AI could impact them.”"}],[{"start":54.650000000000006,"text":"Executives at the sector’s annual SuperReturn conference in Berlin said the technology could disrupt businesses across a swath of sectors backed by private equity groups, after software buyout deals collapsed this year over fears that new AI tools would undermine those companies’ business models. "}],[{"start":71.75,"text":"“Apologies to the lawyers, accountants, consultants in the room,” Apollo Global Management executive Scott Kleinman told SuperReturn delegates. “You’re going to see a lot of pressure.” "}],[{"start":82.6,"text":"Shares in Accenture, the world’s largest listed consultancy, have fallen by almost half in the past year, indicating the scale of investors’ fears that AI will damage professional services groups. "}],[{"start":95.19999999999999,"text":"Executives said that private capital groups were starting to shun new investments in some professional services firms because of uncertainty over their long-term revenues and valuations. "}],[{"start":106.89999999999999,"text":"“Few . . . are looking to invest in certain white-collar services companies undergoing a revolution in their business model and which are more exposed to AI displacement risk,” said Joana Rocha Scaff, head of European private equity at Neuberger Berman."}],[{"start":121.8,"text":"Scaff said groups performing writing, translation and legal services were particularly vulnerable. While AI offered efficiency and margin improvement, “there are also risks of revenue disruptions, especially if they charge by man hours”, she added. "}],[{"start":137.25,"text":"Professional services groups that are not operating in regulated sectors are seen by some investors as particularly exposed to disruption by AI. "}],[{"start":146.8,"text":"“We looked at bookkeeping businesses charging by the hour, which we felt were particularly exposed [as they did not do regulated audit work],” said Andrew Sillitoe, co-chief executive of Apax Partners. “On the other hand, the value of having your accounts signed off by an auditor is so much more than the sum of the person-hours taken to do it. Here, AI automation should be a tailwind.”"}],[{"start":170.10000000000002,"text":"AI disruption of professional services groups threatens to dent returns for private equity firms that have poured billions of dollars into the sector in recent years, attracted by their low capital expenditure and the opportunity to roll up smaller groups. "}],[{"start":185.00000000000003,"text":"Last year, a Blackstone-led group bought a majority stake in Citrin Cooperman from smaller buyout rival New Mountain Capital for more than $2bn. New Mountain and Cinven have also bought stakes in Grant Thornton’s US, UK and Germany arms. "}],[{"start":201.70000000000002,"text":"Legal services groups have also been targets, with Inflexion taking UK law firm DWF private in 2023. In the US, buyout groups have also been developing corporate structures to allow them to back legal firms, which have traditionally operated as partnerships with little or no external investment. "}],[{"start":219.50000000000003,"text":"Executives said they were increasingly focused on sectors such as industrials, where companies hold significant assets and have a low risk of being rendered obsolete by technology — dubbed the halo trade."}],[{"start":231.10000000000002,"text":"“It’s weird that the market only cares about software,” said a top credit executive at one of the biggest private capital groups. “AI could be valuable to accounting firms, but will small accounting roll-ups be able to compete with KPMG [in deploying AI]?”"}],[{"start":248.15000000000003,"text":"Other buyout executives with investments in accounting groups said, however, that those that deployed AI well and adapted to new revenue models could benefit from the changes sweeping the sector."}],[{"start":270.05,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1781594753_5324.mp3"}