Grant Thornton + CBIZ. So What.

In the largest deal of its kind in more than 25 years, Grant Thornton has entered into a definitive agreement to acquire CBIZ to create the fifth largest professional services, tax and advisory provider in the United States.

Grant Thornton identified enhancements in AI-enabled capabilities, multinational reach, industry specialization and service breadth — while creating strong cultural and strategic fit with a shared commitment to quality and client experience, as reasons for the move. The combination of the two firms adds up to close to $7.5 billion in revenues.

These firms are huge. And there are a lot of large firms out there. After all, the smallest firm in a listing of the top 100 accounting firms in the U.S. does over $67 million in revenue. That’s a long way from what most small- to mid-sized accounting practices bill.

In our five-state region there are three Grant Thornton offices; one in Minnesota and two in Wisconsin. There are two CBIZ offices in the region; one in both Minnesota and Wisconsin. Odds are they probably don’t share customers with most of the thousands of independent small accounting practices across the region. However, it’s handy to know how an acquisition can impact the local and regional accounting services marketplace – and possibly your accounting practice.

Acquisition Can Work for Any Size Firm.

Big mergers aren’t done to keep everything running the same way in two companies. The whole point is to leverage strengths and shore up weaknesses. That means change; and while change can mean turnover – of employees, suppliers, and clients – its promise is to deliver more capability, business, and profit.

These objectives are good goals for any size accounting firm. And acquisition can help achieve them faster. A merger or acquisition could be a consideration based on the growth goals and objectives.

The merger and acquisition activity of accounting practices of all sizes is at a very high level right now. Sunbelt Business Advisors and True North Mergers and Acquisitions have guided 58 accounting practice owners through successful sales of their companies since 2020. This trend is increasing dramatically.

Because there are over 1200 accounting firms in the state of Minnesota alone, the industry is highly fragmented. This offers a lot of consolidation opportunities for buyers, and we are helping many accounting practice owners sort through this type of activity right now.

It’s notable that this consolidation is driving premium valuations for the right accounting firms.

Acquiring Capabilities.

Do you want to serve larger clients, add additional capabilities, build a more strategic support practice or perhaps move into a new geographic market? If so, determining the capabilities that need to be acquired is valuable homework.

As an example, many accounting firms are offering more bundled tax, audit and advisory services, which generate more recurring revenue and loyalty. Firms with these services are even more valuable in the marketplace, and more apt to be targets of acquisition.

Overall, the industry offers buyers sources of predictable, consistent, high margin and contractual recurring revenue streams. In many cases, an accounting practice also creates the opportunity for synergies by expanding into advisory and wealth management services.

AI? Believe It.

The application of AI mentioned in the Grant Thornton announcement applies to firms of all sizes. AI is an issue for everyone in the industry. Businesses utilizing cloud platforms, AI and automation to enable scalability and remote service cannot only be very attractive for the right buyer – they are fundamental requirements to compete today.

Use of newer technology is one of the key drivers in establishing the value of an accounting firm. Use of cloud platforms, automation and AI that boost margins and enable scalable, remote services, can make a firm run better, become worth more and therefore more attractive for acquisition.

We find some owners are not hotly interested in investing a great deal in new technology. While this point-of-view may be working today, depending on the size of the practice and the needs of its clients, investment in AI and other technologies is an absolute necessity for tomorrow. Rapidly increasing use of technology and applications are a big reason there is so much consolidation occurring in the accounting industry. The technology is already here – creating more reasons and opportunities to either enhance or sell an accounting practice.

Understanding Multiples When Selling a Practice.

If you are thinking about selling it's useful to understand that there are no simple answers to what an accounting practice is worth. Valuation depends on profitability, client composition, operational structure, and current buyer demand. The good news is that accounting practice valuations follow recognizable patterns, and owners can often improve value before going to market.

Revenue multiples are often used when earnings vary widely, or a buyer is primarily acquiring your book of business. Typical market ranges are based on gross revenue, with higher multiples tied to strong client retention and clean, trackable production. Higher average fees, especially business work and monthly services, and limited client business concentration can also be important. Revenue is a starting point—not the whole story. Two firms can have identical revenue and very different margins.

EBITDA (Seller Cash Flow Multiples) is the usual focus for strategic firms and platform/private equity buyers. They normalize owner compensation, non-recurring expenses, and one-time items to see what revenues the practice truly generates. As firms scale, multiples tend to rise with size and operating maturity.

In addition to all the math, if you are thinking way down the road, it’s very important for a seller to be willing to execute an effective transition plan. The time required for transition should be considered when planning how much time you, as a business owner, wants the exit to take.

No Slam Dunks.

Nationally, approximately 70% of business sale transactions fail to close.The stakes are too high to rely on guesswork. A successful transition doesn't just affect you. Your employees, vendors, customers, and community depend on continuity. The alternative — an unprepared or distressed exit — can result in a business being sold at much less than its true value.

Whether you are in acquisition mode or considering a sale to a strategic buyer, a private equity transaction, a management buyout, or a family transition, each option demands preparation.

It’s important to get a good business valuation, understand why deal structure matters as much as the price of the business, and avoid mistakes that business owners sometimes make regarding this critical decision and process.

The accounting industry is in a rare window — elevated valuations and active buyers are creating real opportunity. Getting an exit plan in place is one of the most important steps you can take to protect and maximize that which may have taken a lifetime to build – your business.

Meanwhile.

Summer is almost over and accounting firms are heading into the October tax season getting ready to solve tax problems, maximize deductions and income with lots of last-minute, crunch time work.

We have found that for many owners of accounting businesses, as they look forward to the next “lap around the track” it’s a time many consider the possibility of growing their business, through acquisition, or selling their practice, to move on to another life chapter or opportunity, or even retire.

Whether you decide to Grow or Go, the time to act is right now. There probably hasn’t been a better time than right now to take advantage of the experience and expertise that can be applied to your decision to either grow your practice or move on to the next chapter of your life – Grow or Go!

Matt Sobieski, CPA
Sunbelt Business Advisors Accounting Practice Specialist
612-964-8884

The Sunbelt team includes 5 CPA’s on staff, 12 MBA’s, 23 Certified Business Intermediaries (CAI) and 45 Business Advisors – most of whom are prior business owners. All our advisors are also licensed real estate agents; more expertise for you if there is a real estate component to your practice that you want to sell.