The Wave of Consolidation in the Accounting Industry
In recent years, the accounting industry has seen a significant wave of consolidation, reshaping the landscape as both private equity (PE) firms and public companies aggressively pursue acquisitions. This trend is driven by a combination of factors including succession planning, the need for scale to compete effectively, and the lure of stable revenue streams that accounting firms offer. Here, we delve into this phenomenon, focusing particularly on CBIZ's acquisition of Marcum and the private equity takeover of Citrin Cooperman.
The Drive Towards Consolidation
The accounting sector, traditionally characterized by numerous small to mid-sized firms, is now witnessing a consolidation boom. This is largely due to:
Succession Planning: As baby boomer partners retire, there’s a pressing need for firms to find successors or sell out to larger entities that can afford to take over.
Technological Advancements: The need to invest in technology to stay competitive is pushing firms either to merge or be acquired by those with the resources to do so.
Market Competition: Larger firms can offer more comprehensive services, attracting clients who prefer one-stop solutions for their financial needs.
Private Equity in Accounting
Private equity has become a pivotal player in this consolidation wave. PE firms invest in accounting practices for several reasons:
Stable Cash Flows: Accounting firms typically have predictable and recurring revenue, which is attractive to investors looking for stability.
Scalability: By acquiring multiple firms, PE can create a platform for growth, often through additional bolt-on acquisitions.
Efficiency Improvements: PE can introduce operational efficiencies, enhancing profitability.
Citrin Cooperman’s Private Equity Journey:
Citrin Cooperman, a prominent accounting firm, was initially acquired by New Mountain Capital in 2022. This deal was part of a broader strategy by PE to penetrate deeper into the professional services sector. More recently, in early 2025, Blackstone led an investment group to buy out New Mountain Capital's stake, valuing Citrin Cooperman at an enterprise value of $2 billion. This move underscored the high valuations and rapid growth expectations placed on accounting firms by private equity.
Public Companies and Strategic Acquisitions
While PE firms focus on financial returns, public companies like CBIZ are motivated by strategic growth:
Enhanced Service Offerings: Acquiring firms allow for the expansion of service lines, particularly in advisory and technology areas.
Geographic Expansion: Buying firms in new regions can instantly increase market presence without the slow process of organic growth.
CBIZ’s Acquisition of Marcum:
In a landmark deal, CBIZ, a publicly traded professional services provider, announced the acquisition of Marcum, one of the top accounting firms in the U.S., in July 2024, with the transaction closing in November of the same year. This acquisition, valued at approximately $2.3 billion, was not just about size but about creating a powerhouse in professional services, particularly for the middle market. The merger has positioned CBIZ as the seventh-largest accounting services provider in the U.S., with over 10,000 employees and 135,000 clients. The strategic fit was clear, with CBIZ aiming to enhance its capabilities in areas like technology solutions and executive search, areas where Marcum had established strength.
Implications for Clients and Service Levels
With each major acquisition, there's a growing concern among clients about the implications for fees and service quality. As firms grow larger and more corporate, there's an observable trend where:
Client Fees Rise: As firms consolidate, the cost of services often increases. The need to justify higher valuations and satisfy investor expectations can lead to fee hikes, making services less affordable for small to medium-sized businesses.
Service Levels Suffer: There's a prevalent worry that the personal touch and detailed attention to client needs might diminish. Larger firms can sometimes treat clients as numbers rather than unique entities with individual needs, leading to a decline in the quality of service.
However, not all firms follow this path. SoFla Prime Consulting stands as a beacon of personalized service in this sea of consolidation. Led by Douglas Kohn, MBA, CPA, and Jeff Seman, CPA, SoFla Prime Consulting is committed to a concierge-style service model. Douglas Kohn, with his extensive experience in operations and finance, brings a strategic oversight that ensures client needs are not just met but anticipated. Jeff Seman complements this with his deep expertise in tax and audit, ensuring thorough, client-focused solutions. Together, they have built a firm where:
Clients are Treated as Individuals: Every client at SoFla Prime Consulting receives personalized attention, ensuring their unique needs are understood and addressed without treating them as mere numbers in a ledger.
Quality Over Quantity: The firm prioritizes the quality of service over expanding client numbers, maintaining a close-knit relationship with each client, offering tailored financial strategies, and providing direct access to the firm's leadership.
Commitment to Community and Ethical Practice: Unlike larger conglomerates, SoFla Prime Consulting emphasizes ethical practices, community involvement, and long-term client relationships over short-term gains.
Looking Forward
The consolidation trend in the accounting industry shows no signs of slowing down. As more firms consider the benefits of merging or being acquired, the industry will continue to evolve. This evolution might lead to a landscape dominated by a few large players, potentially altering the traditional client-accountant relationship but offering clients more comprehensive solutions under one roof.
In conclusion, while the consolidation through acquisitions by private equity and public companies brings numerous benefits like scalability, enhanced service offerings, and technological adoption, it also poses challenges in maintaining the essence of what made these firms successful initially. The balance between growth and core values, particularly the level of personalized service, will be crucial for the long-term success of these newly formed entities. Clients seeking a more tailored approach might find solace in firms like SoFla Prime Consulting, where Douglas Kohn and Jeff Seman continue to uphold the values of personalized, high-quality service in an industry increasingly dominated by numbers.
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