The Institutional Test: What Private Equity Has Not Yet Proved in US Accounting

Five years ago, the central question surrounding private equity investment in US accounting firms was whether the model could work at all. Accounting firms were constrained by professional-ownership rules, built around partnership economics and governed through structures that often made major strategic decisions slow, politically difficult and expensive for the current generation of partners. External investors could not simply acquire an audit firm as they might acquire an ordinary commercial enterprise, and it remained uncertain whether partners would accept institutional ownership, whether alternative practice structures would withstand scrutiny and whether another buyer would eventually emerge for the resulting platforms.

Those questions have largely been answered. What began with TowerBrook’s investment in EisnerAmper in 2021 has developed into a structural transformation of the US accounting market. Citrin Cooperman has passed from New Mountain Capital to Blackstone, EisnerAmper has completed a continuation vehicle transaction after 27 acquisitions, and Crowe and Eide Bailly have agreed to accept their first institutional investments. Baker Tilly and Moss Adams have combined, while Grant Thornton has agreed to acquire CBIZ for $5 billion, creating a US business with more than $5 billion in domestic revenue. (Blackstone – Citrin Cooperman Investment; EisnerAmper – Continuation Vehicle Transaction; Crowe – KKR Investment; Eide Bailly – Reverence Capital Investment; Grant Thornton – CBIZ Acquisition)

Private equity can therefore enter accounting firms, overcome the profession’s ownership constraints, provide partner liquidity, finance acquisitions and produce subsequent capital events. None of those questions remains theoretical, but together they establish a narrower thesis than is sometimes suggested. The first phase proved that accounting firms could be recapitalized, consolidated and transferred between institutional owners. It did not prove that the resulting organizations could produce sustained organic growth, integrate repeated acquisitions, preserve professional quality, develop future leaders and remain coherent through successive ownership cycles. The market is now moving from a transaction test to an institutional test.

What the First Wave Actually Proved

The first investment wave addressed genuine weaknesses in the traditional partnership model. Many firms were carrying substantial deferred-compensation obligations while asking each new generation of partners to finance commitments made to the previous one. Important investments in technology and delivery infrastructure reduced current partner income, even when their strategic necessity was obvious, while decisions affecting the institution often required consensus among partners whose incentives, retirement horizons and willingness to accept risk differed materially. Firms could see the need for change without possessing either the capital or the governance structures required to move quickly.

Private equity offered an unusually effective answer. Existing partners received liquidity, retirement obligations could be restructured, and firms gained access to acquisition capital and more centralized decision-making. Research based on interviews with 20 attest partners at private equity-backed firms found that respondents valued the additional capital, management discipline and “business hygiene” introduced by investors, even while expressing concerns about autonomy, integration, succession and the profession’s future. The partnership model did not become vulnerable because it had no strengths; it became vulnerable because it had accumulated constraints that external capital could solve. (Donahoo, Nielson and Pickerd – Selling Its Soul? Private Equity and the Commercialization of the Attest Profession)

The first wave also proved that accounting firms could be converted into investable platforms. Alternative practice structures separated the licensed attest entity from the tax, advisory and other non-attest activities in which outside investors could hold an economic interest, while service agreements continued to connect the legally distinct organizations. Once that architecture became accepted, a fragmented profession containing thousands of local and regional firms became accessible to institutional capital. IFAC has identified more than 1,000 accountancy firms worldwide that received private equity investment during the past decade, with fewer than 200 initial investments facilitating almost 900 subsequent transactions. (IFAC – Private Equity Investment in Accountancy; IFAC – Transaction Structure Considerations)

The Easy Economics Are Disappearing

A white paper published in April 2026 by Pointe Advisory, now part of Stout, in collaboration with Allan Koltin and Chris Mazzei captured the confidence surrounding the first investment wave. It concluded that “the PE playbook is working,” pointing to successful transactions, growing investor interest and strong outcomes for participating partners. Yet the paper also contained a more consequential observation: the investment thesis was shifting from “buying into the category” to “winning on execution.” That distinction deserves more attention than the declaration that the original experiment had been validated. (Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing)

According to the report, representative first-wave investors entered at approximately 9–11 times EBITDA and exited at approximately 13–16 times, while second-wave investors have entered at approximately 12–15 times and may be targeting exits at 15–18 times. Using the midpoints of those ranges, multiple expansion alone could have increased the enterprise value of a representative first-wave investment by roughly 45%, before accounting for EBITDA growth or leverage. The comparable prospective increase for the second wave is closer to 22%, meaning that later investors can rely far less on the market simply deciding that the category deserves a higher valuation. (Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing)

Citrin Cooperman illustrates the effect. New Mountain reportedly invested in 2021 at an enterprise value of approximately $500 million, while Blackstone’s acquisition of its interest in 2025 valued the firm at more than $2 billion. Revenue had increased substantially, largely through acquisitions, but the transaction also reflected a significant rerating of the category as the ownership structure became accepted and a sponsor-to-sponsor transfer became credible. Second-wave investors are entering after much of that uncertainty has disappeared, which means that future returns must depend more heavily on organic growth, integration, margin improvement and the quality of the operating institution. (Financial Times – Blackstone Joins Private Equity Deal Wave in US Accounting; Blackstone – Citrin Cooperman Investment)

Buying Revenue Is Not the Same as Building an Institution

The reported growth of private equity-backed accounting firms looks compelling until it is separated into its components. The Pointe and Koltin analysis estimates that the group it calls the “Next Eight” grew at an annual rate of almost 12% between 2015 and 2025, but it also concludes that approximately 60% of that expansion was acquired, with organic growth remaining much closer to the underlying market. The relationship between acquisition volume and reported revenue growth confirms that the consolidation strategy worked financially, but says much less about whether the underlying firms became commercially stronger. (Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing)

Buying firms produces revenue growth, but it does not demonstrate that clients are buying more, cross-selling has improved, pricing power has strengthened or professional productivity has increased. Nor does it reveal whether acquired businesses have moved onto common systems, adopted consistent delivery models, aligned their partner incentives or become part of a coherent institution. Revenue can be consolidated in the financial statements almost immediately, while operational integration may take years and can remain incomplete long after the transaction has been described publicly as successful.

The character of the acquisitions is also changing. Average acquired-firm revenue among the Next Eight reportedly increased from approximately $20–30 million during 2021–2023 to around $50–70 million during 2024–2025, while the number of transactions declined. The market is moving from relatively small geographic additions toward combinations involving established institutions with their own leadership groups, cultures and operating systems. Acquisition-led growth is therefore becoming more expensive at the same time that the integrations required to support it are becoming more difficult. (Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing)

From Buy-and-Build to Institution-on-Institution Integration

Grant Thornton’s proposed acquisition of CBIZ represents a further step change. The transaction carries an enterprise value of $5 billion and would create a US business with more than $5 billion in domestic revenue, but CBIZ itself had only recently completed its acquisition of Marcum. In February 2026, CBIZ described that integration as nearly complete and reported that full-year revenue had increased by 52%, while explicitly attributing much of the increase to the acquisition. Its outlook for 2026, however, anticipated total revenue growth of only 2–5%. (CBIZ – Full-Year 2025 Financial Results; Grant Thornton – CBIZ Acquisition; Financial Times – Grant Thornton Seals Accounting Sector’s Largest Takeover in a Generation)

Grant Thornton is therefore not acquiring a collection of small regional practices. It is acquiring a public company that has spent the previous period combining with another large accounting organization and is now preparing to enter a still larger integration. Different compensation systems, leadership structures, technologies, client segments, service portfolios and professional-risk environments must be brought together while the earlier Marcum combination is still being absorbed. The transaction may be financially coherent, but the institutional challenge is materially different from completing a succession of smaller acquisitions.

The relevant question is not whether the combined revenue will appear in the same financial statements, because that outcome is largely determined by the transaction documents. The harder question is whether thousands of professionals can be made to behave as one firm, whether resources can be allocated according to enterprise priorities and whether duplicated complexity can be removed without disrupting client relationships or professional quality. This is no longer conventional buy-and-build. It is institution-on-institution integration, and it will require a different standard of evidence.

Capital, Debt and the Operating Model

Capital initially differentiated private equity-backed firms from their independent competitors. A platform with institutional funding could offer selling partners liquidity that a conventional merger often could not match, invest in technology without immediately reducing partner distributions and move more quickly when acquisition targets emerged. That advantage is becoming less distinctive as more firms obtain access to institutional capital. Grant Thornton, Baker Tilly, Citrin Cooperman and EisnerAmper already have it, while Crowe and Eide Bailly have agreed to join them. Capital is gradually becoming less of a strategy and more of an entry requirement. (IFAC – Private Equity Investment in Accountancy; Crowe – KKR Investment; Eide Bailly – Reverence Capital Investment)

Competitive advantage must consequently move toward integration capability, commercial focus, proprietary data, workflow ownership, talent development and leadership quality. Private equity may even be raising the minimum cost of remaining competitive for the profession as a whole, because independent firms must respond to the investments being made by those with external backing. Grant Thornton’s announced $1 billion commitment to AI and advanced technology is one indication of the escalating investment cycle. The paradox is that private equity can solve a shortage of capital while making capital itself less differentiating. (Grant Thornton – $1 Billion AI and Technology Investment)

Debt is another part of the equation that remains less visible. In 2025, CBIZ reported adjusted EBITDA of approximately $447 million and interest expense of approximately $107 million. Baker Tilly offers an even larger example. A Blackstone-led lender group provided roughly $1.5 billion of incremental financing for its combination with Moss Adams, alongside existing private debt. By July 2026, Deutsche Bank was reportedly preparing to refinance around $3 billion of Baker Tilly debt through the leveraged-loan market. Debt is not inherently problematic for firms with recurring revenue and relatively low capital intensity, but interest must be paid regardless of whether growth slows, integrations take longer or acquired partners leave. As fixed obligations increase, decisions about pricing, utilisation, compensation, investment and headcount become part of debt-service capacity rather than merely operating choices. (CBIZ – Full-Year 2025 Financial Results; Blackstone Credit – Baker Tilly Financing; Bloomberg – Baker Tilly Eyes $3 Billion in Debt to Replace Private Credit)

Partner Alignment and Professional Quality

Private equity changes the economic relationship between partners and the institution. Traditional deferred compensation and end-of-career value are replaced by immediate liquidity and equity rollovers whose eventual value depends on EBITDA growth and the multiple achieved at a subsequent ownership event. The Pointe and Koltin paper cites high levels of compensation satisfaction among partners and managing directors who participated in private equity-backed transactions, which is meaningful evidence that the model can resolve retirement uncertainty and create a clearer financial interest in enterprise performance. (Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing)

Yet this evidence largely reflects the experience of people senior enough to participate in the liquidity event. It says less about managers and directors expected to become partners after the transaction, employees who receive little or no equity or the next generation that must build a career inside the institution, whose most valuable ownership moment may already have occurred. Interviews with attest partners found uncertainty about who would lead the firm after another liquidity event and whether younger professionals would ever receive a meaningful share of the ownership value. (Donahoo, Nielson and Pickerd – Selling Its Soul? Private Equity and the Commercialization of the Attest Profession)

The same uncertainty applies to professional quality. Additional capital could improve quality through better systems, specialist talent and stronger methodologies, but the available empirical evidence remains limited and most ownership periods are still short. The SEC has also warned that independence-monitoring systems designed for one ownership structure may need to be reconsidered when a new sponsor brings a different portfolio of financial interests and potential conflicts. The alternative practice structure solved the legal problem of entry, but its resilience across repeated ownership changes remains largely untested. (SEC – Auditor Independence and Ethical Responsibilities When Contemplating an Audit Firm Restructuring; Donahoo, Nielson and Pickerd – Selling Its Soul?)

AI Does Not Automatically Become EBITDA

The next institutional test will also be technological. AI can reduce the time required to perform research, prepare documentation, analyze data and complete parts of the audit, tax and advisory process, but firms can deploy the technology, reduce delivery hours and still fail to produce meaningful economic improvement. Clients may expect productivity gains to be reflected in lower fees, liberated capacity may remain unused and technology may be added to existing processes without changing how work is organized. Implementation costs may also arrive long before measurable returns.

The Pointe and Koltin paper describes this as the “compression to conversion” problem: technology compresses the labor required, but the firm must still convert that reduction into revenue growth, margin improvement or a stronger client proposition. The challenge is particularly acute for firms that monetize work through hours, utilization and leverage, because a technology that reduces the hours required is simultaneously reducing the quantity of the unit the firm currently sells. The firm wants lower costs while preserving price, the client wants savings reflected in the fee and the investor wants the productivity gain converted into EBITDA. (Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing)

Grant Thornton’s $1 billion technology commitment demonstrates the scale of the investment now being made, but access and adoption do not solve the monetization problem. Economic value will depend on whether firms redesign workflows, pricing, roles and client propositions rather than simply enabling professionals to perform existing tasks somewhat faster. If the hour becomes less important as the unit of value, AI will not merely improve the existing operating model; it will begin changing the leverage structure, career pyramid and commercial logic on which many investment cases were built. (Grant Thornton – $1 Billion AI and Technology Investment)

The Second Ownership Cycle Is the Institutional Test

Citrin Cooperman and EisnerAmper provide the first meaningful evidence that liquidity can occur after the founding transaction. New Mountain sold its interest in Citrin Cooperman to Blackstone after the firm had grown substantially, while TowerBrook transferred EisnerAmper into a continuation vehicle led by Carlyle AlpInvest, with Hamilton Lane as co-lead. Both transactions demonstrate that the original investors are not necessarily trapped and that scaled accounting platforms can continue attracting institutional capital. (Blackstone – Citrin Cooperman Investment; EisnerAmper – Continuation Vehicle Transaction)

They nevertheless provide different forms of evidence. Citrin Cooperman changed sponsors, while EisnerAmper remained under TowerBrook’s direction even though the investors holding the economic interest changed. A continuation vehicle can provide liquidity and additional time to develop an asset, but it postpones the test of whether a genuinely different owner can assume responsibility for the institution and preserve its strategic continuity. As platforms become larger, the pool of potential buyers also narrows, financing requirements increase and regulatory analysis becomes more complex.

Repeated ownership changes test something the founding transaction does not: whether the firm can preserve continuity while its financial owner, leadership incentives and strategic horizon change. Clients expect stability, professionals build careers over decades and audit quality requires sustained investment, while private equity funds operate through finite ownership periods and must eventually return capital. Those time horizons can coexist, but only if the institution possesses governance mechanisms strong enough to protect commitments whose value extends beyond the holding period of the current owner.

What the Institutional Test Requires

The private equity thesis in accounting can no longer be evaluated primarily through deal activity, headline revenue and subsequent valuation. Those measures reveal whether a transaction has created financial value, but they say less about whether the underlying firm has become a stronger institution. A credible institutional thesis must explain how growth is being produced, whether acquisitions have genuinely been integrated, how financial pressure affects operating choices and whether the organization remains attractive to the professionals expected to lead it after the founding transaction generation has departed.

These dimensions are connected rather than independent. Weak organic growth increases pressure to complete acquisitions, while acquisitions create integration complexity and may require additional debt. Greater debt increases pressure on pricing, utilization, compensation and cost, which can then influence talent development, professional quality and long-term investment. Uncertainty about future ownership can make succession more difficult, while weak succession makes integration and cultural continuity harder. The institutional test is therefore not a checklist in which seven individual boxes can be marked independently, but a system in which weakness in one dimension eventually creates pressure in the others.

The test is also necessarily more demanding than the transaction test. A transaction can be structured and completed within months, while institutional durability reveals itself only across integrations, leadership transitions, economic cycles and changes of ownership. The important question is not simply whether the next transaction can occur at a higher valuation, but whether the firm will reach that transaction with stronger organic economics, more integrated operations, manageable leverage, credible future leadership and sustained professional trust. That is the evidence private equity in US accounting has not yet had sufficient time to produce.

Closing Thoughts

The first wave of private equity investment in US accounting was not an illusion. It unlocked capital, resolved partner-liquidity problems, accelerated decision-making and created platforms that grew at a pace few traditional partnerships would have attempted. The early investors accepted genuine uncertainty about regulation, partner acceptance and the existence of future buyers, and several appear to have been rewarded for doing so. The transaction thesis has therefore passed a meaningful test.

But transaction success, sponsor returns and institutional improvement should not be treated as interchangeable. The firms grew, but much of the growth was acquired. Valuation multiples increased, but later investors entered at those higher multiples. Established partners received liquidity, but the long-term ownership proposition for the next generation remains uneven. AI has created visible efficiencies, but the industry has not yet established who will capture the surplus, while alternative practice structures remain largely untested across repeated changes of ownership.

The next phase begins under more demanding conditions. Acquisition targets are larger and more expensive, integration increasingly involves entire institutions, debt is becoming more visible and AI may begin reducing the professional labor embedded in the services on which many investment cases were built. None of this means that the private equity model will fail, but it does mean that its source of success must change. Financial architecture opened the market; operating and institutional architecture must now justify the valuation.

What This Means for Boards

Boards evaluating private capital should separate the transaction thesis from the institutional thesis. The transaction thesis explains valuation, liquidity, financing, governance rights and the route to the next capital event. The institutional thesis must explain how the firm will grow organically, integrate acquisitions, preserve quality, develop future leaders and remain coherent when ownership changes again. A compelling transaction thesis can create substantial value, but it does not remove the need for a credible explanation of what the institution is intended to become.

Reported growth should therefore be decomposed into organic volume, pricing, acquired revenue and service-mix effects, while EBITDA improvement should be separated into genuine productivity, compensation restructuring, offshoring, utilization, price increases and temporary cost reductions. Boards should also demand evidence of integration beyond common branding and consolidated reporting, including whether systems, workflows, incentives and client-ownership models genuinely operate across the combined enterprise. Without that evidence, financial aggregation can easily be mistaken for operating improvement.

Boards must also look beyond the founding partners’ transaction and ask how future leaders will earn meaningful ownership, which investments will remain protected when their returns extend beyond the current holding period and what will happen when the present leadership generation retires. Professional quality, independence and institutional trust should be explicit elements of the investment case rather than assumptions sitting outside it. The most important question is not merely what the firm will be worth at the next ownership event, but what will be institutionally stronger when that event occurs.

Continue Exploring

The Bigger Picture

The Professional Services Transformation Theory
Why changing economics, ownership structures, technology and operating models are forcing professional-services firms to reconsider the institutions through which they create and distribute value.

Follow the Second Ownership Cycle

Case Study 41: EisnerAmper and the Test of the Second Ownership Cycle
How a continuation vehicle provided another liquidity event while postponing the harder test of whether the institution can remain coherent under genuinely different ownership.

Explore the Generational Question

Case Study 38: Crowe, KKR and the End of the Generational Contract
Why private equity changes not only ownership but the economic relationship between current partners, future leaders and the institution they are expected to build.

Explore the Exit Problem

The Exit Problem: Private Equity Has Found Ways Into Professional Services. Getting Out Is Harder
Why larger platforms, higher valuations and increasingly complex institutional structures make the next ownership event progressively more demanding.

Apply the Thinking to Your Firm

Future of Professional Services – Board Sessions
Independent strategic discussions helping boards and executive teams examine what external capital, ownership change and institutional redesign mean for the future of their own firm.

Sources

Primary Sources

• Blackstone – Citrin Cooperman Investment Announcement
• EisnerAmper – Continuation Vehicle Transaction with TowerBrook
• Crowe – Investment from KKR
• Eide Bailly – Investment from Reverence Capital Partners
• Grant Thornton – Acquisition of CBIZ
• Grant Thornton – $1 Billion AI and Technology Investment
• CBIZ – Full-Year 2025 Financial Results
• CBIZ – 2025 Annual Report
• SEC – Auditor Independence and Ethical Responsibilities When Contemplating an Audit Firm Restructuring
• IFAC – Private Equity Investment in Accountancy
• IFAC – Transaction Structure Considerations
• Blackstone Credit – Baker Tilly Financing Disclosure

Research and Market Sources

• Stout/Pointe Advisory – Investing in Accounting Firms: How PE Investment Theses Are Changing
• Donahoo, Nielson and Pickerd – Selling Its Soul? Private Equity and the Commercialization of the Attest Profession
• Financial Times – Blackstone Joins Private Equity Deal Wave in US Accounting
• Financial Times – Grant Thornton Seals Accounting Sector’s Largest Takeover in a Generation
• Bloomberg – Baker Tilly Eyes $3 Billion in Debt to Replace Private Credit