In Canopy’s webinar Inside an Accounting Firm Deal, Bob and Doug Lewis (Visionary Group) broke down what’s actually happening in CPA firm private equity transactions, including how firms get valued, how deal terms are structured, and where sellers and buyers tend to misread risk.

Check out the real questions and answers firm owners asked during the webinar.

Deal Structures & Economics

Q: What deal structures are most common in private equity accounting firm acquisitions?

A: Most deals use a blend of cash at close, earnouts, and rollover equity. All-cash deals still happen for smaller firms, but they’re less common. Pure earnout structures are also rare.

Q: How common are earnouts and clawbacks?

A: Earnouts are common in most deals. Clawbacks exist in documentation but are rarely triggered in practice. The bigger issue is usually how earnout targets are defined, measured, and enforced.

Q: How risky is rollover equity in a CPA firm sale?

A: The risk is tied to equity quality. Not all acquirers offer comparable equity. Sellers should evaluate the platform’s track record, leadership, capitalization strategy, and realistic path to a future liquidity event rather than relying on optimistic appreciation projections.

Q: How often does the “second bite of the apple” deliver real upside?

A: It’s still early for many firms. Second liquidity events have happened in a limited number of cases, mostly at larger platform levels. Broader proof in the middle market is still developing.

Valuation: How the Price Gets Built

Q: How are accounting firms valued in today’s market?

A: Pricing typically starts with net adjusted EBITDA, then applies a multiple. To get to adjusted EBITDA, buyers normalize partner compensation and apply add-backs. The multiple reflects risk, scale, and buyer demand.

Q: Why do add-backs matter so much?

A: Add-backs can materially change value because they’re multiplied by the EBITDA multiple. If an expense won’t continue post-close, it may increase adjusted EBITDA and therefore enterprise value.

Q: What is a “healthy” EBITDA margin for a firm evaluating a transaction?

A: The webinar cited roughly 30% gross EBITDA (before equity partner compensation) as a strong benchmark. Firms under ~20% can signal operational distress that may reduce value or constrain buyer appetite.

Q: Do smaller firms get lower EBITDA multiples?

A: Generally, yes. Multiples tend to rise with firm size, assuming profitability and leadership depth hold. Geography, niche, and growth opportunity can still move the number in either direction.

Risk & Downside Scenarios

Q: Have accounting firm rollups ever failed or lost value?

A: Yes, there have been rollups over the past decade that didn’t produce strong exit outcomes. That’s one reason the speakers emphasized evaluating equity quality and operating fundamentals, not just headline terms.

Q: What happens if the buyer sells or recapitalizes later?

A: Once a seller gives up control (especially in a majority sale), the next liquidity event is largely determined by the platform. Buyer “plans” can change, so sellers should discuss future capitalization and exit expectations early.

Q: Do operating synergies matter more than financial engineering?

A: Yes. The speakers emphasized that culture and operating alignment often matter more than small differences in valuation. Many buyers can get close on price. Integration success is harder to fix after the fact.

Buyer Types: PE vs CPA-Backed Platforms

Q: If valuations are similar, how do outcomes differ between PE buyers and CPA-backed buyers with a sponsor?

A: Valuations can be surprisingly close. Differences show up in structure and control, including governance, integration expectations, and the quality and mechanics of rollover equity. When price is comparable, fit and alignment often decide the deal.

Marketability & Valuation Drivers

Q: How does client concentration affect valuation and marketability?

A: Concentration impacts both risk and buyer appetite. Firms with a defined niche (service or industry) can be easier to underwrite than generalist practices. Buyers also look closely at revenue dependency on a small number of clients.

Q: Does geographic concentration increase risk compared to multi-state presence?

A: It depends on scale and fragmentation. The webinar flagged downside when firms have many small, sub-scale locations that add overhead complexity. Geography can also create upside when a firm provides meaningful scale in a market buyers want.

Q: How should offshore staff be treated in revenue-per-head metrics?

A: One practical approach is to normalize offshore labor into an onshore full-time-equivalent cost basis to evaluate productivity consistently.

Technology & Operational Impact

Q: Does a modern tech stack increase valuation multiples?

A: Indirectly. Buyers price profitability. Technology matters when it improves margins, reporting, scalability, and operational consistency. Simply adopting tools doesn’t automatically raise value.

Q: If two firms have similar EBITDA, does the more streamlined firm command a higher multiple?

A: Often, yes—if other factors are comparable. Streamlined workflows can reduce integration risk, but valuation still depends on leadership depth, client mix, niches, and service lines.

Q: How do buyers evaluate a firm’s ability to scale without adding overhead?

A: Buyers assess the client base for cross-sell potential and underserved needs. A firm can look more valuable if a platform can introduce additional services without major incremental cost.

Capital Deployment & Growth Strategy

Q: Is outside capital used more for acquisitions or internal investment?

A: Many platforms invest first in infrastructure (tech, staffing, systems), then shift more capital toward acquisitions once integration capacity is built.

M&A Process & Buyer Landscape

Q: Do most firms use brokers when selling?

A: Smaller firms may use brokers and listings. Many mid-market deals are sourced privately through networks and advisors, and a large number of transactions never become public.

Q: What options exist for buyers actively looking to acquire accounting firms?

A: Buyers range from large consolidators to strategic firms to independent buyers using SBA financing. Competition is intense, so buyers need clarity on what profile they can win and how they differentiate.

Regulatory Considerations

Q: Will private equity ownership in accounting firms face more regulation?

A: It’s being discussed, especially around audit-related considerations, but additional oversight has been limited so far.