What Is Your CPA Firm Worth in Today’s M&A Market?
A Practical Valuation Framework for Private Equity and Traditional Buyers
Over the last several years, CPA firm M&A has evolved from a niche succession solution into a highly institutionalized transaction market. Private equity–backed platforms, regional CPA consolidators, and sophisticated local firms are all actively acquiring—but they are not evaluating firms the same way they did a decade ago.
For firm owners, this has created confusion.
Headline multiples are widely quoted. Buyer interest appears abundant. Yet actual outcomes vary significantly based on how a firm performs under buyer-level scrutiny.
This article provides a clear, market-based framework for understanding how CPA firms are valued today—across both private equity–backed buyers and traditional CPA firm acquirers—and what owners should understand before engaging the market.
The Shift in CPA Firm Valuation: From Revenue to Risk-Adjusted EBITDA
Historically, CPA firms were valued primarily on revenue multiples, often driven by client retention assumptions and partner continuity.
That model has changed.
Today, virtually all sophisticated buyers—particularly PE-backed platforms—value firms based on adjusted EBITDA, with revenue serving as a secondary context metric.
Why EBITDA Has Become the Primary Metric
EBITDA allows buyers to:
Normalize owner compensation
Adjust for non-recurring expenses
Evaluate scalability
Compare acquisitions across platforms
Underwrite cash flow durability
For sellers, this means valuation is no longer about size alone—it is about earnings quality and sustainability.
Typical Valuation Ranges in the Current Market
While every transaction is unique, current market observations generally fall into the following ranges:
Private Equity–Backed Platform Buyers
EBITDA Multiples: ~4.5x to 6.5x+
Target EBITDA: Typically $750K–$3M+ (exceptions exist)
Deal Structure: Cash at close + rollover equity
Hold Period: 5–7 years
Higher multiples are driven by:
Recurring revenue
Strong margins
Scalable staff model
Minimal partner concentration risk
Clear post-close growth pathway
Traditional CPA Firm Buyers
EBITDA or Revenue-Equivalent Multiples: ~3.0x to 4.5x EBITDA (or equivalent economics)
Target EBITDA: $300K–$1.5M+
Deal Structure: Heavier on earnouts and deferred consideration
Hold Period: Long-term ownership
These buyers often prioritize:
Cultural alignment
Geographic adjacency
Partner continuity
Client service compatibility
Adjusted EBITDA: What Buyers Actually Normalize
A critical—and often misunderstood—part of valuation is EBITDA normalization.
Buyers typically adjust for:
Above-market owner compensation
Personal expenses run through the firm
One-time legal, recruiting, or consulting costs
Temporary staffing inefficiencies
Non-operating partner benefits
However, buyers also discount EBITDA for:
Excessive partner production reliance
Under-market staffing
Client concentration
Weak realization or utilization
Pending retirements without transition plans
The result is risk-adjusted EBITDA, not accounting EBITDA.
EBITDA Margin Expectations
Margin profile matters almost as much as absolute EBITDA.
Typical buyer expectations:
PE-backed buyers: 20%–30%+ adjusted EBITDA margins
Traditional buyers: 18%–25% (with flexibility for strategic fit)
Margins below these ranges are not disqualifying, but they impact:
Multiple
Deal structure
Cash vs earnout mix
Post-close expectations
Cash at Close vs Rollover Equity
One of the most significant differences between buyer types is deal structure.
Private Equity Buyers
Often require:
20%–40% equity rollover
Continued partner involvement
Alignment with platform growth objectives
Equity can materially enhance total proceeds—but introduces:
Illiquidity risk
Execution risk
Platform dependency
Traditional CPA Firm Buyers
Typically emphasize:
Higher cash percentage over time
Earnouts tied to retention
Less equity complexity
This structure reduces upside but also reduces exposure.
What Buyers Require Before Advancing a Deal
Across both buyer categories, the following are now standard expectations:
Financial & Operational Requirements
Clean historical financials
Clear partner compensation structure
Documented add-backs
Consistent billing and realization metrics
Demonstrated client retention
Organizational Requirements
Identified second-tier leadership
Staff depth beyond owners
Defined transition plan
Willingness to remain post-close (usually 2–5 years)
Firms that lack clarity in these areas can still transact—but valuation and structure are affected.
Internal Succession vs External Sale: A Valuation Reality Check
Internal succession remains a goal for many firm owners, but market realities often intervene:
Limited partner capital
Risk aversion among next-gen leaders
Long payout horizons
Concentrated transition risk
External transactions increasingly provide:
Liquidity certainty
Risk diversification
Broader operational support
Legacy preservation when properly structured
This is why many owners explore M&A as a planning exercise, not a reaction.
Timing Matters—But Not in the Way Owners Expect
Waiting to sell is not inherently bad.
Waiting without preparation often is.
Value erosion typically comes from:
Unplanned retirements
Staff turnover
Margin compression
Delayed leadership development
The most successful transactions begin with early valuation clarity, even if a deal is years away.
A Thoughtful First Step
Understanding what your firm could be worth—under different buyer scenarios—allows you to:
Compare succession paths objectively
Prepare deliberately
Maintain negotiating leverage
Control timing
This does not require going to market.
It requires insight.
Confidential Discussion
If you would like a confidential, no-obligation discussion to understand how private equity and traditional buyers may view your firm today—or in the future—we are always open to a thoughtful conversation.
About Us
Ashley-Kincaid is a premier mergers and acquisitions firm dedicated to helping CPA firms nationwide grow and succeed through strategic acquisitions, while also providing exit solutions for sellers.
With deep industry experience, Ashley-Kincaid specializes in firm-to-firm mergers and acquisitions, catering to clients with gross revenues ranging from $500,000 to $15 million. If you're a CPA firm aiming to expand or considering an exit strategy, Ashley-Kincaid is your go-to partner. Schedule a Call today to explore their services and arrange a consultation.