TIVP064: Kelly Partners Group: The Constellation Software of Accounting? w/ Daniel Mahncke & Shawn O’Malley - The Intrinsic Value Podcast - The Investor’s Podcast Network Recap

Podcast: The Intrinsic Value Podcast - The Investor’s Podcast Network

Published: 2026-03-22

What Happened

Kelly Partners Group (KPG) stands out as a serial acquirer primarily focused on accounting and tax businesses in Australia, with expansion plans into the UK and the US. Founded by Brett Kelly, who holds nearly 50% ownership, the company aims to double its business every three years by leveraging a partner-owner-driver model. This model involves acquiring a 51% stake in firms, leaving the rest with existing partners, which encourages continued engagement and performance.

The company has compounded revenue at a CAGR of 25% since its IPO in 2017, and its market cap remains under 300 million Australian dollars. KPG's acquisition strategy targets firms facing succession issues, often acquiring at mid-single-digit earnings multiples. A significant part of its strategy includes structured payouts to ensure sellers remain motivated post-acquisition.

Kelly Partners Group is recognized for its ability to maintain an EBITDA margin of 35%, which is significantly higher than the industry average of 18-19%. The company finances acquisitions through cash flow and debt, avoiding dilution through share issuance. Additionally, acquired businesses pay a 9% fee to KPG, covering essential services such as marketing, HR, compliance, and software development.

AI is both a potential disruptor and an opportunity for KPG. While AI could commoditize routine accounting tasks, advisory services, which offer higher margins, are less likely to be affected. The regulatory environment also provides some protection against AI-driven changes, allowing KPG to continue focusing on advisory services that account for 90% of SME clients' tax needs.

Brett Kelly is planning to reduce his stake in KPG to 35%, primarily for liquidity purposes, while still positioning himself for long-term involvement with the company. The firm has expanded into the US, with 15% of its revenue now originating from this market. This expansion includes acquiring six businesses, one of which is Marque in California, generating around $5 million in revenue.

KPG's financial performance is evaluated using NPATA (net profit after tax before amortization), reflecting the complexities of being a multi-business acquirer. With its revenue being nearly 95% annuity-based, KPG enjoys predictable cash flows, which is beneficial during economic uncertainties like the COVID-19 pandemic. The company aims for a revenue target of $500 million by fiscal year 2031.

Concerns exist about KPG's ability to continue finding quality acquisition targets. However, the company believes that the ongoing restructuring in private equity, particularly due to AI market shifts, may present more opportunities at favorable prices. KPG's average workforce age is younger compared to the industry average, aiding in the integration and adaptation to new technologies.

KPG's acquisition strategy and operational model have drawn comparisons to Constellation Software, a successful acquirer in the software space. With a gross margin consistently in the mid to high 50s, KPG's approach to acquisitions and its focus on maintaining centralized systems and brand standards are fundamental to its growth trajectory.

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