The CPA profession is undergoing its most significant transformation in decades. Demographic shifts, private equity investment, and emerging technologies are redefining what it means to run a successful accounting firm.
In a recent episode of Risky Records, host Stephen Vono sat down with Joe Tarasco, founder of Accountants Advisory Group, to discuss the trends, pressures, and possibilities facing accounting firms today. From talent shortages to mergers and acquisitions (M&A), Tarasco offered a candid look at how accounting firms can interpret these trends while staying competitive, managing risk, and preparing for the future.
The great reshaping of the CPA marketplace
As Tarasco puts it, the marketplace for accounting firms has trended toward three distinct tiers: large, private equity-backed firms; small, entrepreneurial firms; and a shrinking middle. “The existence of the independent, mid-sized firm of maybe $20 to $50 million is almost gone,” he says. “You’re seeing more smaller firms or big mega firms. And PE has come in, buying 20 to 30 firms at a time.”
Driving this shift are demographic and resource factors. The youngest Baby Boomers are now in their early sixties, prompting many firm owners to reevaluate their succession plans. At the same time, smaller firms often lack the necessary infrastructure (including marketing, HR, technology, and leadership) to compete at higher levels.
“There’s no better time to grow your firm in public accounting than right now,” Tarasco notes. “But smaller firms really can’t take advantage of it because they don’t have the capacity and the technical resources.”
For many, the solution has been to merge or sell to larger firms with the capital, technology, and talent needed to meet growing client demands.
Private equity’s accelerating influence
Private equity has changed the calculus of firm valuation and deal structure. Before PE entered the field, most accounting firm buyouts were valued at around one times revenue, with no upfront cash. Today, PE-backed transactions often employ EBITDA-based valuations, offering sellers a combination of cash and stock.
“PE brings a tremendous amount of capital to the table, not just for infrastructure, but for growth through acquisition,” Tarasco says. “When these firms buy others, they’re picking up talent and clients they can sell additional services to. It’s a win-win.”
While this influx of capital has fueled growth and innovation, it has also intensified competition. The so-called “feeding frenzy” in firm acquisitions, Tarasco predicts, will continue for at least the next three years before slowing down as the market consolidates.
Technology, talent, and the AI effect
Even as firms navigate ownership changes, the talent crisis remains front and center. Recruiting, training, and retaining skilled professionals has become increasingly difficult. Tarasco recommends that firms outsource 25 to 30 percent of their compliance work to offshore teams to relieve capacity pressures and protect staff from burnout.
Technology costs are also rising rapidly. “Many firms are spending $30,000 a month on security and IT services,” Vono notes during the discussion. For smaller practices, those costs are unsustainable without scale.
Adding to the mix is artificial intelligence. “The industry is going to change very rapidly through AI,” Tarasco says. “It will cut down a significant amount of time in research, advisory, and compliance.” While AI will not eliminate jobs, it will reshape them, creating demand for professionals who can interpret and advise on the insights these tools produce.
Making your firm attractive to buyers
For firms considering a merger or sale, preparation is key. Tarasco’s advice: focus on profitability, accountability, and modernization. “Whatever you need to do to improve profitability–upgrade your client base, raise your fees, use technology, outsource–do it now,” he says.
He also emphasizes the importance of developing and retaining strong teams. “Buyers are looking to acquire firms not only for their clients, but for the talent. Make the investment now. If you have to overpay to keep them, do it.”
Sellers should not wait for external triggers such as lease expirations or partner retirements. “Start now,” Tarasco urges. “Firms start too late to really set the course for the future. Do it before you really have to.”
Understanding culture and fit
While deal terms and valuations are crucial, culture can make or break a merger. Tarasco advises firms to conduct their own due diligence: meeting potential partners in person, asking questions about accountability, leadership, and performance expectations, and speaking candidly about what matters most.
“If it’s important to you to spend time with your family, make sure that’s not going to be an issue,” he says. “You have to be honest with yourself that you can be happy in that world.”
Not every firm (or individual partner) will thrive in a larger corporate environment. Some may prefer the autonomy of smaller practices, while others welcome the structure, training, and advancement opportunities larger firms can offer.
The bottom line: Assess where you stand today
For firms uncertain about their future, Tarasco’s closing message is simple: take stock and act early. “The market changed,” he says. “It’s not your fault. But it’s time to explore alternatives and options that fit your mindset about where you want to be.”
Whether that means merging, investing in technology, or strengthening your bench for succession, the goal is the same: to secure your firm’s legacy while adapting to a changing profession.
As Vono sums up in the episode, “Change begets opportunity.” With these significant trend shifts in the accounting landscape, those who honestly assess their position and take proactive steps will be the ones who thrive.
Listen to the full episode: Navigating Changes in the CPA Profession
Explore more resources for accounting firms: McGowan Professional’s Learning Center