The landscape of Mergers and Acquisitions for Certified Public Accounting (CPA) firms has been dramatically reshaped in recent years, mainly driven by private equity’s (PE) entrance into the mergers and acquisitions (M&A) arena. Since the landmark EisnerAmper transaction in 2021, professional service firms have found themselves at a critical crossroads, weighing the immediate financial rewards of private equity investment against the long-term implications for governance, firm culture, and strategic autonomy.
Navigating this complex and evolving landscape requires more than just strategy—it demands insight from someone who has lived it. As the former CEO of Clifton Gunderson (now CLA) and a trusted advisor to firms across the country, I’ve been at the forefront of M&A, private equity, and succession planning within the accounting profession. With decades of hands-on experience and a deep understanding of what’s at stake, I provide the clarity, direction, and leadership firms need to move forward confidently.
In this blog, I’ve outlined key considerations, observations, and practical guidance for CPA firms evaluating a potential partnership with private equity. Whether you’re early in your exploration or deep into discussions, this information is designed to help you make well-informed decisions aligned with your firm’s long-term goals.
Understanding Private Equity Investment in the Accounting Industry
The entry of private equity investors into the accounting profession marked a seismic shift. Traditionally, CPA firm partners would realize their equity and firm value upon retirement, yet receive payouts over 10 to 15 years. The private equity model disrupted this pattern, offering partners immediate liquidity—recognizing equity and value wealth years earlier than the traditional model.
Moreover, private equity funds became more attractive as an investment into accounting firms because of their ability to provide capital infusion for infrastructure, cutting-edge technology upgrades, and strategic growth initiatives. The drawback for this model however, is the new firm ownership structure often diminishes the “voice” of traditional firm leaders because the PE takes majority ownership, creating governance changes, challenges and shifting control dynamics.
As a CPA firm consultant, I emphasize caution when consulting managing partners. While immediate financial rewards are tempting, they must weigh the full implications for their autonomy, impact on the firm, culture, client service, governance models, and long-term sustainability.
Key Motivations Driving Private Equity Acquisitions
There are three primary motivations for professional firms exploring private equity ownership.
1. Immediate Wealth Realization
Access to upfront capital provides a liquidity event for partners, significantly earlier than traditional models.
2. Capital for Expansion
PE firms act as a bank, offering the financial resources and access to capital needed to grow through future investments in technology, talent acquisition, advisory services, and geographic expansion.
3. Succession Planning and Talent Gaps
Some firms face leadership succession challenges; private equity offers alternative paths for continuity when traditional successor and talent development strategies are not there.
However, these motivations must be balanced against potential downsides, including loss of control and shifts in firm culture.
The true value of your firm lies in its people, culture, and legacy—not just the payout.
Carl George
Essential Steps to Prepare Your CPA Firm for Private Equity Investors
1. Conduct a Firm Health Assessment: Evaluate Readiness, Value Drivers, and Red Flags Before Engaging Private Equity
2. Understand the Mechanics of Private Equity Investment
Preparing for a private equity acquisition starts with a candid, in-depth “physical” of your firm. It begins by asking key questions such as:
- Do we have a strong, future-ready leadership team in place as part of our succession plan?
- Are we consistently profitable, experiencing healthy growth, and meeting our financial targets and goals?
- Is our firm financially fit, and is our balance sheet strong?
- Are we delivering value-added advisory services in addition to traditional compliance work?
- Is our client base both stable and well-diversified across industries and services?
- Are we strategically investing in modern advanced technology and infrastructure to stay competitive?
- Are the firm’s owners committed to the changes required for ongoing success?
If your firm reveals weaknesses (“flags”) in any of these areas, it’s essential to address them proactively before entering discussions with private equity investors.
Private equity ownership fundamentally alters a CPA firm’s structure. PE investors pool capital, acquires majority stake, and expect active strategic oversight and ROI. It’s important to keep in mind that the core objective of private equity is to exit its investment—typically within a 3- to 5-year window. As a result, CPA firms should anticipate entering a recurring cycle of being sold or merged into larger PE-backed entities or other buyers makes a return to the traditional independent ownership of CPA firm model increasingly unlikely over time.
Managing partners and firm leaders must perform due diligence to understand:
- Future ownership trajectory
- Governance and structure changes
- Potential shifts in firm culture
- Decision-making authority on Day 2 post acquisition
3. Evaluate Potential Private Equity Partners Thoroughly
During this process, I caution partners not to halt their due diligence once they see a favorable multiple of earnings. Financial payouts are important, but equally critical are:
- Any impacts on the firm’s culture
- Decision-making frameworks
- Investment priorities post-acquisition
- Long-term strategic alignment
Firms must ask: Will this PE partnership model help us maintain our culture, employees and serve employees and clients the way we value most?
4. Assess Economic Downturn Risk
The accounting industry has enjoyed unprecedented growth since 2010, but a downturn is inevitable. PE-backed firms have yet to experience significant economic strain. In tough times, PE investors prioritize their returns, not firm stability. Firm leaders must have contingency plans for downturn resilience, particularly regarding:
- Client service continuity
- Maintaining revenue streams
- Talent retention
- Capital access
5. Structure the Deal with Caution
Choosing cash payouts over contingent earnouts can provide immediate financial security but may diminish long-term leverage. Structuring the acquisition deal must include:
- Defined governance and joint decision making structures
- Contingency plans for earnings distributions for economic downturns
- Cultural preservation
Long-Term Strategic Planning for Post-Acquisition Success
1. Empower Firm Leadership
Post-acquisition success hinges on engaged, strategic leadership. Firm leaders must:
- Clearly define new roles and responsibilities
- Align operational plans with PE investor goals
- Maintain focus on client service, talent retention, and firm culture
2. Accelerate Growth Strategies with Strategic Expansion: Elevate Advisory Services and Diversify Business Lines
Private equity firms are focused on growth and strong returns. CPA firms that broaden their service offerings beyond compliance work become far more appealing to PE investors.
3. Focus on Internal People Strategies
Talent is key. Firms must recruit, retain, and develop skilled professionals to align with new strategic goals. A strong leadership and talent pipeline enhances firm valuation and performance.
4. Plan for Future PE Spin-Offs or Exits
Understand that PE firms generally seek a profitable exit within three to six years. Strategic planning must consider:
- Potential spin-offs
- Future private equity investors
- Opportunities for management buyouts
Lessons Learned from Four Years of Private Equity in CPA Firms
Drawing on years of consulting experience with CPA firms, here are key lessons I’ve observed since private equity began reshaping the CPA profession.
Governance is critical
Firms that neglected governance and decision making planning experienced post-acquisition challenges.
Sustainable growth, not growth for growths sake
Concentrate on your people and client relationships. They will bring growth and profitability.
Culture cannot be an afterthought
Misalignment between firm and investor cultures leads to erosion of firm identity, client dissatisfaction and discouraged personnel.
Economic downturn planning is essential
CPA firms and PE must have alignment of priorities in the event of an economic downturn.
Private Equity Is Not the Only Option
CPA firms considering a liquidity event or succession solution have three primary options. Each path has distinct implications for ownership structure, autonomy, culture, and future strategic direction.
1. Traditional M&A
Merging with or being acquired by another accounting or advisory firm. Many firms have enhanced their M&A terms and offers as a result of the PE structure.
2. Private Equity Ownership
Selling an ownership stake to a private equity investor.
3. Employee Stock Ownership Plan (ESOP)
Selling ownership to employees, preserving independence while creating liquidity.
Final Thoughts: The Stakes Are High for CPA Firms Looking At PE
Private equity has irrevocably changed the CPA profession’s landscape. Whether your firm ultimately embraces a PE partnership, pursues a traditional M&A transaction, establishes an ESOP, or remains fiercely independent, the journey must be navigated with discipline, foresight, and expert guidance.
The stakes include:
- The preservation of your firm’s culture
- Firm growth opportunities
- The protection of your client service model
- Growth of your people
- The legacy you leave behind
- Recognition of owner value and timing of the payout
I bring extensive expertise to this critical decision-making process. With deep experience in M&A, private equity, succession planning, partner compensation strategies, and strategic leadership within the accounting profession, I’m uniquely positioned to guide your firm through these transformative times.
