Until recently, PE was largely uninterested in a staid accounting services sector that shunned private investment. Now each side sees an opportunity to partner with the other. Accountants need cash to deploy AI, retain talent and overhaul aging partnerships. PE is drawn to the fragmented sector’s stable cash flow, loyal customer base and rosy financial projections.
The surge in PE interest in accounting firms began in 2021 when TowerBrook Capital Partners invested in EisnerAmper, then the 18th largest firm in the U.S.
The trend has since trickled down to medium and smaller PE shops buying medium and smaller accounting businesses. More than 70 deals have closed this year as more shops deploy PE’s healthcare playbook of alternative practice structures to satisfy ownership regulations.
In particular, PE firms split acquisitions into two entities. The auditing side of the practice stays with the original owners while PE invests in a holdco owning the remaining business, which includes consulting, tax, risk advisory and other “non-attesting” services.
PE and the practices eager for investment see growth opportunities especially in consulting services and are expanding traditional CPA business into wide-ranging consultancies. PE platforms are sprouting.
Emerging manager Unity Partners, for instance, was founded in 2022 with a mid-market thesis and accounting services as one of its main pillars. The Dallas-based shop launched its Prosperity Partners platform last year with the acquisition of accounting firm NDH.
The platform has since scooped five more firms, including Cendrowski Corporate Advisors in September and Wiener and Garg a month later.
“Everybody wants to get in on accounting,” says Allan Koltin, chief executive at advisory firm Koltin Consulting Group. “Private equity’s involvement the last three years has been beyond imagination.”
Chicago-based Koltin has advised accounting firms on more than 70 deals since 2022, including nine sales to New Mountain Capital’s Citrin Cooperman platform.
New Mountain bought Citrin in 2022 and is already shopping the asset, Koltin says. That’s because New Mountain moved upmarket earlier this year with its investment in Grant Thornton, the sixth-largest accounting firm and the biggest yet to take PE money.
New Mountain is also marketing Citrin because it’s also a hot commodity, Koltrins says.
New Mountain has grown Citrin’s annual revenues from $315 million to $850 million and could fetch an Ebitda multiple in the mid-teens. Koltin says New Mountain acquired Citrin with an Ebitda multiple of around 11.
Koltin says the rising multiples are warranted because accounting firms have been historically undervalued and that PE’s recent investments are uncovering the sector’s growth potential, especially with relatively simple but expensive technological improvements.
“PE firms are not overpaying, they’re just adjusting to what we call the new normal in accounting,” Koltin says.
He predicts that more than half of the 30 largest U.S. accounting firms will be under PE control by the end of next year.
Notable PE platforms include:
| Firm | Platform | Year | Firm | Platform | Year |
| New Mountain | Grant Thornton | 2024 | Hellman & Friedman | Baker & Tilly | 2024 |
| Unity Partners | Prosperity Partners | 2023 | Alpine Investors | Ascend | 2023 |
| New Mountain | Citrin Cooperman | 2023 | Parthenon Capital | Cherry Bekaert | 2022 |
Capstone Partners Director Erik Larson says limited disclosures have made pegging valuations difficult, but they appear to “have increased meaningfully as sponsor demand has created heightened competition for platform opportunities.”
Larson sees accounting valuations settling in line with business services at about nine times Ebitda.
Larson published Capstones’s inaugural report on the sector in August, recording more than 70 transactions in the first eight months of 2024.
“Sellers will find a deep pool of motivated buyers eager to secure their platform investment in the space,” Larson says.
Looking for a small to medium-sized CPA firm? Contact Koltin at [email protected].
