STRATEGY

The math is simple, even if the implications are not.

By CPA Trendlines

For decades, the value of a CPA firm was constrained by one simple fact: partners had to buy each other out with their own money. That reality imposed discipline, but it also capped valuation. Firms were priced to be affordable, not aspirational.

That changed when private equity arrived.

MORE Private Equity

Over the past five years, private equity funding has fundamentally altered how CPA firms are valued — not by changing what firms do, but by changing how the market prices scale, recurring revenue and growth potential. The result has been a sharp, uneven reset in firm values, with some practices worth 2 to 4 times what similar firms would have commanded just a few years earlier.

Before private equity entered the market, the top 500 CPA firms, which generate roughly $146 billion in annual net revenue, would have been valued at roughly $170 billion using traditional pricing norms. Applying today’s private-equity-driven revenue multiples implies a total enterprise value of more than $400 billion — a valuation reset of more than $200 billion without any change in underlying revenue. Even the smallest firms may rise with the tide. The 500th largest firm runs about $6 million a year.

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