Historically, mergers and acquisitions in public accounting were primarily between CPA firms. But over the past decade, private equity (PE) firms have become major players, driving a wave of “takeover activity.” Many see TowerBrook Capital Partners’ investment in EisnerAmper in August 2021 as a key turning point – marking the start of a broader trend that shows no signs of slowing.
In less than three years, PE firms have acquired stakes in five of the top 26 US accounting firms, with a third of the largest US accounting groups now backed by private equity. Most recently, Citrin Cooperman made history as the first firm to change hands twice, with Blackstone acquiring New Mountain Capital’s stake in a deal that valued the firm at over $2 billion.
So why the surge in PE interest? Three key factors stand out:
- Recurring revenue: Tax and accounting firms generate predictable income streams, making them an attractive investment
- Industry fragmentation: The highly fragmented nature of the profession presents opportunities for consolidation and economies of scale
- Regulatory complexity: As financial regulations become more intricate, demand for specialized accounting services continues to rise.
As mergers and private equity deals continue to reshape the accounting landscape, this article explores what it means for the future of the profession.
The evolution of mergers: From traditional growth to PE-driven consolidation
Mergers have long played a significant role in the accounting profession. As Charly Weinstein, CEO of Eisner Advisory Group LLC puts it; “The profession has been moving toward consolidation for a lot of years now. The pressure and intensity on mergers have been growing for the last four or five years.”
But while consolidation isn’t new, the recent surge in PE investment marks a shift in how firms are fueling growth. Traditionally, accounting was a low-capital profession, with firms expanding by broadening client services, entering new markets or developing niche specialties. These strategies, while effective, required time and significant upfront investment. As Allan Koltin, CEO of Koltin Consulting Group explains, “It was just a matter of time before firms would thirst for capital.”
That need for capital has become even more urgent as firms face an intensifying war for talent. Workforce expectations are shifting, driven in part by rapid technological advancements. Koltin highlights the impact; “This talent war comes back to how technology transformed the accounting business literally overnight. Today, talent has so many other options. A young tax senior told me, ‘I only have to prepare a tax return 15 times to know how to do it. I don’t need to do it 15,000 times.’ That was an ‘aha’ moment for me. If your model is about recruiting, building, and retaining your stars, you need to give them challenging work.”
As competition for top talent intensifies, some firms are turning to PE funding to adapt and grow. Koltin identifies four key ways accounting firms are leveraging PE investment:
- Succession planning & buyouts: Funding retirements and deferred compensation obligations
- Mergers & acquisitions: Since securing PE investment in 2021, Citrin Cooperman has completed 10 acquisitions, increasing revenue by over $200 million
- Expanding nontraditional services: Growing advisory, consulting, and wealth management capabilities
- Technology & AI investment: Developing automation and digital tools to attract and retain top-tier talent.
Implications for the public accounting industry
PE investment in public accounting brings both opportunities and challenges. While the benefits – such as increased capital and growth potential – are well understood, certain complexities remain less clear. Regulatory scrutiny, ethical considerations and the long-term impact on firm culture and independence continue to shape the conversation.
Regulatory challenges
In most states, CPA firms must be majority-owned by CPAs. To comply, many PE-backed firms use an “alternative practice structure,” ensuring audit and attest services remain CPA-controlled while allowing PE investment in advisory and consulting. For instance, in Citrin Cooperman’s recent acquisition, Blackstone included smaller investors in its stake to address audit independence concerns. The SEC’s acting chief accountant, Paul Munter, has cautioned firms to exercise great care, noting that investments from non-traditional accounting entities “elevate the risk to an auditor’s independence.”
Changes to deferred compensation
PE investment can help firms attract top talent by offering competitive salaries and career growth opportunities. However, as Koltin notes, the shift to a more corporate model may not suit every firm or, in our experience, every candidate. This transition affects partnership compensation. Traditionally, CPA firm partners relied on long-term deferred compensation upon retirement, but PE-backed firms are moving toward ownership stakes and shorter-term financial incentives.
For younger professionals, this shift can present an attractive opportunity. “You can see a transaction that has a liquidity event for you every five or 10 years – as opposed to waiting until you’re 65,” says Michelle Thompson, CEO of Cherry Bekaert Advisory LLC. However, it also carries significant risks. While retiring partners may see substantial buyouts, remaining employees’ financial success often depends on the firm’s ability to grow and execute future sales. As Gary Shamis, CEO of Winding River Consulting, puts it, “The retiring partner sees a lot of dollar signs, and then the rising partner has a lot of question marks.”
Potential cultural differences
Further, balancing the long-term goals of a CPA firm with the short-term financial expectations of PE investors adds complexity. PE firms typically seek high returns within a relatively short time frame. This can create pressure for rapid growth and profitability, sometimes shifting priorities away from long-term client relationships and service quality. Cultural clashes may also arise if the strategic direction of the new investors diverges from the firm’s traditional approach.
Choosing the right PE partner is critical. Joel Cooperman, former CEO and current executive chairman of Citrin Cooperman Advisors LLC, emphasizes that his firm walked away from a deal with another PE firm, before the New Mountain Group, because the fit wasn’t right. This underscores the importance of selecting investors who align with the firm’s values and long-term vision.
At Eisner Advisory Group LLC, CEO Charly Weinstein acknowledges that transitioning to a PE-backed model requires real commitment. “You really have to be committed to seeing the benefits if you’re going to go down this path, […] Every firm must figure out for themselves how to be sustainable, relevant, and important. Not everyone in the profession is on board, and that’s OK.” In short, PE investment isn’t right for every firm and each must decide what’s best for their future and their employees.
The long-term impact of PE on the accounting profession remains to be seen. While it is reshaping business models and fostering growth, it also brings new complexities that firms must navigate carefully.
Working with Distinct
In public accounting, the core responsibilities may be similar across firms but culture, growth opportunities and work-life balance make all the difference. A PE-backed firm isn’t for everyone and our specialist team works with CPA firms of all sizes – from boutique and niche firms to national organizations. If you’re exploring new opportunities in this evolving market, contact our public accounting team today.
