Private equity is transforming accounting firms by accelerating technology adoption, enabling strategic acquisitions, and improving operational efficiency, although most practitioners remain skeptical about outside ownership
Key takeaways:
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Technology investment drives PE interest — Private equity firms provide patient capital for multimillion-dollar technology transformations that traditional partnerships struggle to fund.
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Strategic focus over expansion — PE-backed firms are shifting from growth through breadth to growth through depth, eliminating underperforming service lines to concentrate resources on areas where they can win.
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Competitive pressure is mounting — While most firms remain uninterested in PE transactions, well-capitalized competitors are pulling ahead in technology capabilities, talent attraction, and market positioning.
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A competing accounting firm down the street just acquired its fifth firm this year. Another launched an AI-powered tax platform that can deliver work in hours instead of weeks. And a third is recruiting top talent with equity packages your partnership structure can’t match.
What do they have in common? Private equity backing.
Four years ago, when EisnerAmper announced its deal with TowerBrook Capital Partners — one of the earliest and largest forays of PE money into the tax, audit & accounting industry — most practitioners dismissed it as an anomaly. Today, roughly half of the top 25 accounting firms have completed or are pursuing PE transactions. This isn’t a trend — it’s a fundamental restructuring of the profession.
Why traditional partnerships are losing ground
Consider Citrin Cooperman after New Mountain Capital made its investment in 2021. In four years, Citrin Cooperman has acquired more than 20 accounting firms, expanding to 2,800 professionals across 27 offices. That’s strategic acceleration, not organic growth.
Traditional accounting firm partnerships face a structural problem — they can’t easily fund multimillion-dollar infrastructure buildouts. When firms need enterprise relationship intelligence systems, unified data architectures, or AI-enabled delivery models, where does the capital for these initiatives come from? Partner contributions? Bank loans? Retained earnings that take years to build up?
PE-backed competitors can deploy patient capital —money designed for long-term technology transformation without immediate return pressure. And the gap between what PE-backed firms can do compared to traditional partnerships is widening.
For example, here’s the efficiency paradox: Partners billing at $500 per hour spend significant time on work that should be automated at a $50-per-hour equivalent cost.
That’s not a cost problem — it’s a revenue capacity problem.
PE-backed firms liberate high-value talent, so they are then free to pursue high-value work. When automation and AI-driven tools handle the more routine tasks, partners can focus on complex client challenges, strategic advisory, and relationship building.
The strategy shift: Depth over breadth
The most counterintuitive transformation PE brings is the shift in strategic focus. Traditional firms pursue growth through breadth by launching practice areas because clients asked for them or competitors offer them. The result? A dozen service lines, with about half of them underperforming.
Instead, PE firms ask one simple question: Where does your firm have a right to win?
This PE-backed strategy eliminates hobby businesses — those practice areas that exist because they always have, not because they generate competitive returns. Instead, PE-backed firms concentrate their resources on fewer service lines, focusing on those at which firms genuinely excel. Thus, PE-backed firms are reducing service line breadth while firms’ depth and increasing profitability and market share as well.
Private equity firms’ interest and investment in the tax, audit & accounting industry isn’t by happenstance. PE firms have done their due diligence to understand the industry — and not just from firms’ perspective, but from that of their clients too.
PE-backed firms liberate high-value tax talent, so they are then free to pursue high-value work, leaving automation and AI-driven tools to handle the more routine tasks.
Private equity firms have spent millions of dollars studying the accounting industry, not only tax firms including firms’ clients, and analyzing competitors. The information they’ve gathered represents a cultural shift that has been taking place — something that many firms themselves hadn’t noticed. This shift, from relationship-driven but assumption-based service models to data-informed decision making, has helped PE-backed firms know which services clients value, which delivery models they prefer, and for which services they’ll pay premium rates. That intelligence has become competitive advantage.
Further, PE-backed firms can offer equity incentives to next-generation leaders, which is something traditional partnerships struggle to match. PE-backed firms can provide clear career paths, sophisticated training, and professional development resources. As traditional firms ask young partners to buy in at barely affordable valuations, with unclear leadership paths and outdated technology, PE-backed firms are building employer brands that appeal to professionals who want cutting-edge technology and transparent advancement.
It’s not surprising which firm attracts the best talent.
The skepticism is real — and justified
Despite these benefits, the accounting profession remains skeptical. More than half of industry practitioners say PE isn’t on their radar, and another third aren’t interested, according to the recent Tax Firm Growth Report 2025 from the Thomson Reuters Institute.
Their concerns are legitimate. Two-thirds say they believe PE investment will negatively impact firm integrity and independence, according to the report. And these skeptical practitioners say they worry about culture, client relationships, and an emphasis on earnings over service quality.
Clearly, PE ownership does add complexity to auditor independence, regulatory compliance, and risk management. But PE firms are exceptionally risk-averse when investing in professional services, and the last thing they want is bad press or audit scandals. In fact, their risk management frameworks are often more sophisticated than traditional partnerships maintain.
Yet, for accounting firms seeking growth but determined to stay independent, PE partnership isn’t the only path. Employee Stock Ownership Plans (ESOPs) offer tax advantages and an employee ownership structure while maintaining independence. Firms like BDO and Grassi successfully implemented ESOPs to better provide liquidity while keeping control localized. Other alternatives include traditional financing, mergers between equals, minority capital deals, and targeted asset sales. Each has advantages and limitations.
The key insight: All alternatives require deliberate strategic action; and none involve maintaining the status quo or standing still.
The coming crossroads
The accounting profession continues to be at junction, and all firms will have to decide on their next move. PE-backed competitors are pulling ahead in technology utilization, market positioning, and talent acquisition. The opportunity window for firms to respond isn’t infinite.
Firms that delay action risk entering merger agreements or partnerships from weakened positions. Worse, they risk becoming acquisition targets, joining PE-backed platforms on terms dictated by necessity rather than choice.
Winners won’t be determined by capital structure alone, of course — they’ll be determined by execution speed and strategic clarity. However, PE investment can be a critical enabler in an industry facing unprecedented technological disruption and competitive pressure.
The fundamental question isn’t whether to embrace private equity; rather, it’s whether your firm can achieve necessary transformation speed and scale without it. Every firm leader must answer honestly, urgently, and with clear-eyed assessment of their competitive position and their competitors’ accelerating capabilities.
The profession has changed, and accounting firms have to decide whether they’ll be changing with it, or whether they’ll be changed by it.
For more on the impact of private equity in the tax, audit & accounting industry, you can access the recent Tax Firm Growth Report 2025 from the Thomson Reuters Institute here
