Accountants may picture themselves selling their business to someone less experienced in the industry when they feel ready to sell. Or they may think they will end up selling it to the owner of another accounting firm who is hoping to expand their customer reach.
However, another type of buyer is currently gaining traction in the sector that you may not be aware of: Private equity (PE) firms. Although you may associate PE firms with the manufacturing or technology industries, they’ve begun to enter the accounting space over the last several years. Read on to learn about the number of PE deals happening right now in accounting and the advantages you can enjoy by selling your practice to a PE firm.
How PE Is Changing the Accounting Sector
The rise of PE firms purchasing accounting practices began several years ago and has since escalated. According to CPA Trendlines, accounting firms have entered more than 53 PE-associated deals since 2020, and more than 50 percent of the top accounting companies will have PE ownership before the start of 2026.
PE firms are targeting accounting practices to create larger, scalable platforms by leveraging substantial capital and focusing on operational collaboration. Often, PE acquisitions involve a strategy of consolidating multiple smaller practices into larger entities, creating efficiencies that drive profit margins higher.
These acquisitions can mean significant changes in how CPA practices operate. PE-backed firms often adopt more advanced technologies, expand client service offerings, and implement growth strategies aimed at acquiring new business. These operational upgrades can elevate a practice’s value.
Why PE Firms Are Interested in Buying CPA Firms
Several factors make this industry attractive to investors.
Stability in Revenue
Accounting practices usually have steady, recurring revenue streams. Since many firms develop long-term relationships with their clients, cash flow often remains consistent year over year. Tax preparation, bookkeeping, and advisory services have historically provided dependable revenues, even during economic downturns.
This predictability reduces investment risk for PE firms and allows them to project future earnings confidently. Compared to industries that are more susceptible to economic cycles, accounting remains a relatively safe bet.
Opportunities for Growth
The accounting sector also offers significant expansion opportunities. Many small CPA firms operate within narrow niches or geographic areas, leaving room for growth through strategic initiatives. PE firms see great potential in consolidating these smaller practices under one umbrella, streamlining operations, and turning regional players into national or even international forces in the industry.
Long-Time Customers
Finally, accounting firms typically boast long-standing relationships with loyal clients. These relationships are valuable for establishing recurring revenue and the potential to upsell new services. PE firms recognize that long-time clients are more likely to remain with an organization, even after ownership changes, creating a strong foundation for future business operations.
How PE Firms Differ From Traditional Buyers
Selling your accounting practice to a private equity firm significantly differs from the process of selling to a traditional buyer, and understanding these differences is critical when considering your options.
PE Firms Have Different Motivations
The primary goal of PE firms is to generate high returns on their investments within a relatively short time frame. They achieve this goal by identifying opportunities to improve efficiency, streamline operations, and grow revenue quickly. This focus on financial performance can drive rapid changes within the accounting practice, which may include reshuffling management, adopting new technologies, or adjusting service offerings.
However, traditional buyers tend to prioritize the long-term growth and cultural compatibility of the acquired practice, often valuing relationships over immediate profitability. This divergence in motivation means that practice owners must weigh the potential rewards of selling to a PE firm against the possibility of operational and cultural shifts.
Traditional Buyers Have More Industry Knowledge
Although PE firms may bring financial expertise and operational efficiency strategies to your accounting business, they may lack industry-specific knowledge. Traditional buyers, such as other CPAs or accounting firms, often have firsthand experience within the industry. This insight can make the transition process smoother and may result in a more seamless integration of the acquired practice into their existing operations.
PE Firms Have More Negotiation Experience
One last difference is that PE firms often have teams of experts dedicated to negotiating deals. These seasoned professionals understand the nuances of mergers and acquisitions and can streamline the transaction process.
On the other hand, traditional buyers, such as smaller CPA firms or individuals, may lack the same level of experience, resulting in slower negotiations or less favorable deal structures. Proficiency in deal-making can make PE firms an attractive option for owners who want a quick and efficient sale.
The Upside of Selling to PE Firms
There are many benefits an accounting practice owner may derive from selling to a private equity firm over a traditional buyer.
More Capital
PE firms typically have access to significant financial resources, which means they can offer competitive purchase prices. Additionally, their deep pockets enable them to invest in the practice post-acquisition, funding technology upgrades, marketing campaigns, talent acquisitions, and other initiatives. This influx of capital can help the business achieve growth that otherwise would have been difficult to reach.
Owners Often Get To Stay On
Unlike traditional buyers who may want to fully take over your operations, PE firms often prefer to retain current owners and management teams. This option is attractive to CPA firm owners who want to remain involved in the business, either as consultants, minority stakeholders, or key decision-makers. This arrangement allows owners to benefit from the incoming capital and resources, while maintaining a degree of control over the practice’s direction.
PE Brings Management Experience
PE firms bring a wealth of management expertise to the table. They can optimize daily operations, improve profitability, and drive growth by applying these proven business strategies.
This level of professional management can be especially beneficial for accounting practices that have used the same operational strategies for decades. Owners who sell to PE firms may find that these operational improvements elevate their practice to a level they never thought possible.
Greater Ability To Attract New Workers
Although it can be difficult for the accounting industry to recruit new associates, PE firms may be more appealing to top-tier talent. PE-backed firms can help accounting firms retain strong employees, whether through competitive salaries, better benefits, or flexible work arrangements.
The surge of PE deals in the accounting sector reflects a trend of transformation across the industry. Ultimately, understanding the motivations of PE firms and evaluating the potential benefits can help owners make informed decisions about the future of their practices.
You can also gain a better understanding with the assistance of Private Practice Transitions. Our services, which include practice valuations, will allow you to leave your business in the right hands when you sell your accounting practice.
