Accounting Services Market Update – March 2025

Labor Shortages Necessitate Growth and Innovation in the Accounting Services Market

The Accounting Services market has been in a period of substantial disruption, led by widespread labor shortages and business model shifts. These factors have necessitated growth and innovation for many sector participants as they seek to keep up with rising demand for certified public account (CPA), tax, and advisory services. Of note, nearly one-third (32.4%) of U.S. business owners surveyed in 2024 anticipate a need for accounting and audit support services, according to Capstone’s 2024 Middle Market Business Owners Survey. In line with growing demand, merger and acquisition (M&A) activity in the Accounting Services market has continued at a solid rate through year to date (YTD) 2025. Many accounting firms have also pursued growth capital raises to drive business expansion and employee retention.

Accounting services firms are addressing labor shortages through offshoring and technological solutions in addition to pushing for regulatory changes to help increase talent availability.

Erik LarsonDirector, Capstone Partners

Accounting Firms Execute Expansion Plans, Look to AI Amid Labor Shortages

Workforce shortages have continued to afflict accounting firms as the path to obtaining a CPA license can be arduous for prospective accountants, driving demand for supplemental artificial intelligence (AI) solutions. To date, two U.S. states (Ohio and Virginia) have passed legislation to reduce the amount of college credit hours required prior to taking the CPA exam, according to CFO Dive.¹ However, a limited talent pool has remained a hurdle for many sector participants, especially for smaller firms competing with global players. In Q4 2024, 38% of accounting executives surveyed indicated a need for additional personnel, according to the Association of International Certified Professional Accountants’ (AICPA) Q4 2024 Business and Industry Economic Outlook Survey.² This challenge has been exacerbated for firms with less than $10 million in annual revenue, as 40% reported having too few employees in Q4 2024. Sector participants have increasingly executed expansion plans and have explored AI to mitigate workforce constraints and streamline productivity. Notably, 30% of accounting executives surveyed began to experiment with AI tools for business applications in Q4 2024, up from 23% in Q4 2023, according to the AICPA survey. More than half (57%) of accounting executives plan to pursue expansion plans over the next 12 months, providing a favorable backdrop for 2025 sector M&A activity.

Private Strategic and Sponsor-Backed Buyers Drive M&A in the Accounting Services Market

M&A activity in the Accounting Services market has remained strong through YTD, supported by an active pool of private strategic and private equity (PE) acquirers. Sector M&A volume in 2024 experienced a modest compression, dropping six deals year-over-year (YOY) to 154 transactions announced or completed. Dealmaking in 2024 was buoyed by fervent PE activity as many sponsors took advantage of participants’ shift to the alternative practice structure. PE buyer activity in the space increased 73.5% YOY in 2024. Add-on transactions comprised the vast majority (91.5%) of sponsor deal flow as PE firms looked to bolster portfolio companies with diversified service offerings through buy-and-build strategies. Sector deal flow through YTD has kept pace with the prior year period at 32 transactions. PE firms have maintained their presence in the space to date, fueled by mounting dry powder levels and limited partner (LP) demand for returns. However, private strategic buyers have continued to comprise an overwhelming majority (78.1%) of sector deals YTD. Private strategics have namely consolidated middle market competitors to scale operations and workforces.

Limited disclosed sector valuations have made for a difficult M&A pricing analysis. Anecdotally, sector M&A multiples have increased meaningfully as sponsor demand has created heightened competition for platform opportunities—outpacing the broader Business Services industry. In 2024, the average middle market Business Services industry purchase multiple was 9.0x EV/EBITDA, up from 7.9x EV/EBITDA in 2023, according to Capstone’s 2024 Middle Market Valuations Index. Buyer competition between PE firms and private strategics is anticipated to continue driving M&A activity growth throughout 2025. Notable sector M&A transactions are outlined below, followed by an in-depth analysis of a recent Capstone-advised transaction in the Accounting Services space.

• Hellman & Friedman- and Valeas Capital Partners Management-Backed Baker Tilly US to Acquire CironeFriedberg (February 2025, Undisclosed) – In February 2025, Hellman & Friedman- and Valeas Capital Partners Management-backed Baker Tilly US announced its acquisition of CironeFriedberg for an undisclosed sum. CironeFriedberg offers CPA and advisory services in Connecticut. The acquisition is expected to strengthen Baker Tilly’s presence in the Northeast, establishing essential connections between New York and Massachusetts. “Expanding in the Northeast is a critical step in our long-term growth strategy. CironeFriedberg brings a wealth of experience and industry expertise, further solidifying our commitment to this market,” said Fred Massanova, Baker Tilly’s Chief Growth Officer and Managing Principal, in a press release.³ The transaction marks Baker Tilly’s fifth add-on acquisition in the Accounting Services sector since it received PE backing in February 2024 (undisclosed), demonstrating sponsors’ appetite for buy-and-build strategies in the space.
• Blackstone to Acquire Citrin Cooperman from New Mountain Capital (January 2025, Undisclosed) – Blackstone (NYSE:BX) announced its acquisition of Citrin Cooperman from New Mountain Capital in January 2025. Terms of the deal were not disclosed. Citrin Cooperman operates with the alternative practice structure. The holding company’s subsidiaries include CPA/attest services firm Citrin Cooperman & Company LLP and tax and financial advisory services provider Citrin Cooperman Advisors LLC. As Citrin Cooperman was one of the first sector participants to adopt the alternative practice structure and receive PE investment, this transaction represents a significant milestone for PE activity in the Accounting Services market. New Mountain Capital’s announced sale of the company is expected to pave the way for future PE exits and provides a precedent for sponsor-to-sponsor dealmaking in the sector. With Blackstone’s backing, Citrin Cooperman plans to continue its add-on acquisition strategy and technology investments.

Capstone Partners Advises PKF O’Connor Davies on its Strategic Growth Investment

In November 2024, Capstone Partners advised PKF O’Connor Davies (PKFOD) on its strategic growth investment from Investcorp and PSP Investments. Terms of the transaction are confidential. PKFOD is a top-25 CPA firm, specializing in accounting, tax, and advisory services and is a member of PKF Global, a global network of accounting firms. PKFOD is the brand name under which PKF O’Connor Davies LLP and PKF O’Connor Davies Advisory LLC, independently owned entities, provide professional services in the alternative practice structure in accordance with applicable professional standards. The investment is expected to bolster the firm’s competitive advantage and long-term sustainability. In addition, the deal strengthens the firm’s balance sheet, providing flexibility for increased M&A activity and investing in cutting-edge technology and new service lines. Going forward, PKFOD will continue to operate in its existing alternative practice structure.

The transaction demonstrates PE firms’ heightened appetite for accounting services businesses operating with the alternative practice structure—a trend that has swept the sector since 2021. Sponsor backing can accelerate sector participants’ consolidation efforts, enable more aggressive technology investments, and bolster talent acquisition and retention at the Junior Partner level. Many PE firms have entered the Accounting Services M&A market in search of scalable platform opportunities, often prioritizing targets with strong realization rates and operating metrics, differentiated and value add services, and meaningful cross selling opportunities. “As ownership rules in the sector have evolved, we have been seeking the right platform to back. We were instantly impressed by PKFOD’s leadership team and the exceptional track record of financial performance. Providing the firm with additional resources will help accelerate growth and enhance its competitive position in the Accounting, Tax, and Advisory verticals,” said Vitali Bourchtein, Principal at Investcorp, in a Capstone press release.

Accounting Services Market Participants Increasingly Pursue Equity Financing in 2024

Accounting firms increasingly pursued equity financing in 2024 to buttress growth initiatives while maintaining a majority ownership. Sector equity financing deal volume rose 9.7% YOY to 68 transactions in 2024—the highest on record. Total growth capital deployed in the space registered a modest 10.5% YOY decline in 2024 as many equity financing investors targeted smaller participants with strong upside potential. While growth equity activity in the sector has tapered through YTD 2025, technology-enabled service providers have continued to garner investment appetite at healthy valuations.

Many sector participants have opted to secure equity financing to capitalize on sponsors’ growing appetite, receive partial liquidity, and scale the business in preparation for a full exit. Additionally, a CPA firm does not have to operate with the alternative practice structure to receive a minority stake investment from a sponsor. Accounting firms have primarily utilized growth capital investments to advance inorganic expansion strategies, enhance technology infrastructure, and close the labor gap. Notable equity financing deals in the space are outlined below.

• Armanino Raises Minority Backing from Further Global Capital Management (October 2024) – In October 2024, Armanino received an undisclosed minority stake equity investment from PE firm Further Global Capital Management. Armanino provides CPA, tax, advisory, and consulting services across a myriad of industries including Consumer, Education, Industrials, and Technology. The firm also offers valuation, litigation, Sarbanes–Oxley (SOX) compliance, and financial staffing services. Armanino plans to utilize the funding to accelerate its technology investments, fuel growth through M&A, and help attract and retain top talent.
• Sikich Secures $250 Million Minority Growth Investment from Bain Capital (May 2024) – Sikich raised $250 million in growth funding from PE firm Bain Capital in May 2024. Chicago, Illinois-based Sikich operates as a technology-enabled professional services firm offering accounting, audit, tax, and tailored consulting services. With the added capital, the company plans to further its geographic expansion to all major U.S. markets. “As competition for talent and clients remains high, Sikich’s differentiated business model has enabled the company to gain share in a fragmented market. We are excited to support Sikich’s continued growth strategy, focused on acquisitions and strategic partnerships, with a tailored structure that maximizes value creation while allowing Sikich to retain majority control of the business,” said Cristian Jitianu, a Partner at Bain Capital, in a press release.⁴

The Accounting Services market will likely continue to experience labor shortages until more U.S. states provide alternative paths for CPA licensure. In the meantime, Capstone expects robust capital markets activity in the sector as accounting firms look to bolster workforces through M&A and growth funding. PE firms will likely serve as the crux for sector dealmaking throughout 2025, especially as more accounting businesses adopt the alternative practice structure.

To discuss the widespread impacts labor shortages and the alternative practice structure, provide an update on your business, or learn about Capstone’s wide range of advisory services and Accounting Services market knowledge, please contact us.

Max Morrissey, Vice President, was the lead Market Intelligence contributor to this article.

Endnotes 

1. CFO Dive, “Virginia Becomes Second Stats to Pass New CPA Pathways Legislation,” https://www.cfodive.com/news/virginia-becomes-second-state-new-cpa-pathways-legislation-accountant-accounting/740247/, accessed March 10, 2025.

2. Association of International Certified Professional Accountants, “Q4 2024 Business and Industry Economic Outlook Survey,” https://www.aicpa-cima.com/professional-insights/download/aicpa-and-cima-4q24-business-and-industry-economic-outlook-survey-1, accessed March 11, 2025.

3. Baker Tilly, “Baker Tilly to Acquire CironeFriedberg, Strengthening Presence in the Northeast,” https://www.bakertilly.com/news/baker-tilly-to-acquire-cironefriedberg, accessed March 12, 2025.

4. Bain Capital, “Technology-Enabled Professional Services Firm Sikich Secures $250 Million Minority Growth Investment from Bain Capital,” https://www.baincapital.com/news/technology-enabled-professional-services-firm-sikich-secures-250-million-minority-growth, accessed March 12, 2025.