A Primary Research Primer on Accounting and CPA Firms for Investment Professionals

Accounting was the most boring industry in finance until it became one of the most active. In four years, private equity has bought stakes in 24 of the top 100 US CPA firms, Citrin Cooperman flipped from one sponsor to another at a $2 billion valuation, and CBIZ swallowed Marcum to become the largest pure-play public accounting firm on a US exchange. The Big 4 generate $219 billion combined and now hire AI engineers faster than auditors. KPMG just forced its own auditor to cut fees 14% because AI made the work cheaper. The talent pipeline is collapsing under a 30-year-old credentialing rule, and 45 states are racing to dismantle it. This primer walks investors through what an accounting firm actually is, how the economics work, who owns what, what AI does to fees and margins, where the regulatory risk sits, and what the sharpest hedge fund and PE questions on the sector look like.

What Is an Accounting Firm?

An accounting firm sells regulated time. Partners, managers, seniors and juniors bill hours against an engagement, and the firm collects the difference between billings, write-offs, compensation and overhead. Realisation, the ratio of fees collected to standard billing, is the single number that determines whether a partner keeps her job.

Three service lines sit under one brand at most full-service firms. Audit and assurance is the regulated core that signs off on financial statements. Tax is the recurring annuity covering compliance, advisory and structuring. Advisory is everything else, from M&A transaction services and valuations to ESG, cyber, restructuring and outsourced finance. The Big 4 derive most revenue from advisory and consulting, with audit shrinking as a share even when growing in absolute terms. Consulting accounted for the majority of Deloitte's record total in 2025, whereas EY received most of its revenue from auditing services.

Partnership economics shape everything else. Revenue per equity partner runs $500,000 to $800,000 at average firms, $1 million to $2 million at high performers, and above $2 million at Top 100 firms. Profit per partner runs $150,000 to $300,000 at small firms, $300,000 to $600,000 at well-run mid-sized firms, and $600,000 to $1 million or more at elite performers. Equity partners take home what's left after every other expense, which is why the partnership model historically resisted outside capital. There was no spare cash flow to share.

Why It Matters to Investors

Accounting is fragmentation meeting consolidation in real time. The US alone has roughly 45,000 CPA firms, the vast majority generating $1 million to $50 million in annual revenue. Demand is regulated, recurring and recession-resistant. Engagement letters renew without negotiation. Switching auditor mid-cycle triggers SEC disclosure. For a private equity sponsor, this is the textbook roll-up substrate.

The thesis has worked. Eisner Advisory Group went from $488.8 million in 2021 revenue to $848.7 million in 2023. Citrin Cooperman went from $488 million in 2022 to $700 million in 2023. Cherry Bekaert went from $293 million in 2022 to $585 million in 2023, making it the fastest-growing Top 100 firm in the country with 99.7% growth. IFAC counted fewer than 200 PE investments in accounting firms leading to roughly 900 subsequent transactions in 2025, noting that consolidation has increased four-fold since 2021.

For hedge funds, the picture is harder. The only listed pure-play is CBIZ. The Big 4 are private. But the workflow software layer is investable through Thomson Reuters, Wolters Kluwer, Intuit and Sage. The single most important question for an equity analyst is whether AI is a margin-expansion story for the incumbents or a price-compression story for the buyers. KPMG demanded audit fee reductions from its auditor due to AI-driven cost savings, achieving a 14% discount. That precedent sets the trajectory. AI savings get passed back to clients rather than kept by the auditor.