Key Takeaways
The Grant Thornton-CBIZ deal is an indicator that the accounting industry is undergoing a fundamental restructuring
There’s a widening divide between enormous, PE-backed platforms competing on scale and independent firms competing through specialization
For independent firms to compete, they need to stand out through:
- Specialization (industry, client type, geography, service lines, etc.)
- Clear, Differentiated Brand (articulating how your firm is different)
- Exceptional Client Experience (services tailored specifically to your clients)
Big news in the accounting world: CBIZ, previously the only publicly traded major public-accounting firm, is being acquired by Grant Thornton—which is backed by private equity—in an almost $5 billion all-cash transaction.
But the implications go far beyond a single acquisition. This deal is another signal that the accounting industry is undergoing a fundamental restructuring…and that independent firms will need to rethink how they compete.
The Deal
If this acquisition goes through, the Grant Thornton-CBIZ firm would have over $7 billion in revenue and 35,000 employees across 20 countries.
The last comparable deal of this size was back in the 1990s, when Price Waterhouse and Coopers & Lybrand merged to create PwC—one of today’s Big Four firms. This begs the question: are we watching a Big Five form?
Not quite yet.
The next-smallest Big Four firm, KPMG, generates more than $15 billion. This transaction doesn’t create a Big Five, but it does show how quickly the gap between the Big Four and the next tier is narrowing. One more acquisition for Grant Thornton and they’ll be neck and neck.
Why This Deal Is Bigger Than Grant Thornton and CBIZ
Yes, it’s notable that CBIZ’s acquisition means the disappearance of the last major publicly traded accounting firm.
But the real story here is that accounting firms are becoming larger and more institutionalized.
This is more than a trend.
Baker Tilly acquired Moss Adams. Grant Thornton is acquiring CBIZ. The firm down the street from you just acquired 3 other firms last year. PE ownership is becoming increasingly influential in how accounting firms grow. If you’re a regional accounting firm, you are most likely in the crosshairs of a private equity firm.
The question now is not whether private equity belongs in accounting (because it’s here to stay), but how far PE-backed consolidation will go.
Regional firms are being rolled into national platforms. National platforms are becoming multi-national giants. The name of the game has become scale, geographic reach, technology investment, and acquisition capacity.
Although, as we see more and more of these acquisitions, the PE endgame is still unclear.
If consolidation continues, eventually these platforms will themselves need an exit. Will that mean IPOs? Sales to larger investment firms? PE-to-PE transactions?
The Disappearing Middle of the Accounting Market
Meanwhile, the middle of the accounting market is getting squeezed.
Firms that aren’t large enough to compete on scale but aren’t specialized enough to compete on expertise are increasingly vulnerable.
Private equity isn’t going away.
A year or two ago, some thought private equity was an experiment, that PE firms would eventually leave the accounting industry. But that is not happening.
Private equity is here to stay, and every accounting firm is going to have to reckon with that and find their own path forward in light of it.
We’re seeing a new divide in the accounting industry: enormous, PE-backed platforms competing on scale, and independent firms that will need to compete through specialization and differentiated client experiences.
So what does that mean for firms that want to remain independent?
The Importance of Building a Clear Brand
For independent firms, the importance of having true brand clarity cannot be overstated. Brand clarity starts with not only knowing who you are, but how you’re strategically positioned in the marketplace.
From the top all the way down to your brand foundation, you have to know how you’re different from your competitors. Not just in your logo or colors, but in your brand values, your personality, your messaging.
And your people need to understand who you are as a brand.
We talk a lot about “inside-out marketing.” Make sure everyone in your firm understands what your brand stands for and can communicate that to clients, prospects, and everyone they interact with.
Where Independent Firms Can’t Compete and Where They Can
The first thing to know is that independent firms cannot beat billion-dollar firms at the things billion-dollar firms are built to do.
Grant Thornton’s strategy is built on professional excellence, multinational reach, and other broad capabilities. If you’re a midsize or smaller firm, you cannot differentiate on reach or breadth of services. You can’t compete on global reach.
You also likely can’t differentiate on technology. PE-backed platforms can spend enormous amounts on AI, technology, and infrastructure. While independent firms should absolutely use technology to improve their operations and client experience, that technology will probably not be strong enough to be a positioning advantage.
Where you can win is specialization. Independent firms have to win the positioning game.
You might not be able to out-scale the largest firms. You might not be able to outspend them on technology. And you might not be able to match their geographic reach.
But you can be more relevant to a specific audience. You can win when it comes to positioning.
As this kind of consolidation continues, we will start to see fewer distinct brands in the marketplace. For smaller firms, this is an opportunity to stand out.
We’ve seen this play out repeatedly with midsize firms: the firms that successfully compete against the Big Four don’t win because of their depth. They win because of their brand clarity and specialization.
That’s how you need to think about the Big Ten, Big Twenty, or other large firms as they consolidate. They may claim specialization, but they often can’t demonstrate it in the way a smaller, focused firm can due to their sheer breadth.
Find a way to demonstrate your specialization. And then pursue your own data, research, products, and services to support that positioning.
It could be:
- Industry specialization: construction, healthcare, SaaS, real estate, etc.
- Client type: a particular size or ownership structure.
- Geography specialization: deep expertise in a particular market.
- Service: a highly specific accounting, tax, advisory, or transaction service.
- Delivery model: a distinctive way of serving clients.
Those are the areas where smaller firms can still differentiate.
The Client Experience Advantage
You may not be able to compete on breadth, but once you have specialization, you can build the client experience around that audience. You can offer greater partner access, faster decisions, more flexibility, and services tailored specifically to how those clients operate.
Those are real advantages, making this one of the best growth strategies for independent firms.
If you’re currently working at one of these large firms and are thinking about leaving to start your own firm, you should be asking: How focused can I make this new firm?
Define your client segment and create messaging targeted specifically to them. Not the generic, “We provide great service”, but “We are the accounting firm built specifically for founder-led software companies between $10 million and $100 million in revenue.”
The smaller you are, the more important it becomes to be known for something specific.
The Talent Opportunity in Consolidation
And one more thing: while some employees get excited about the opportunities created by scale, others become frustrated. Changes in leadership, increased bureaucracy, loss of autonomy, changes in culture, and reduced entrepreneurial freedom are frustrating for an employee who values autonomy and the ability to build.
Again, this is an opportunity for smaller firms!
Find those talented people and bring them into your organization. Not because you’re smaller, but because you can offer them something those massive firms can’t: the opportunity to build something of their own. Brand differentiation here becomes a talent-recruiting proposition as you offer the ability to:
- Give employees ownership over initiatives.
- Let partners build practices.
- Make decisions without layers of approval.
- Respond quickly to market changes.
Finding the Opportunity In the Bigger Story
Yes, the Grant Thornton-CBIZ deal is enormous. But the bigger story isn’t the $5 billion transaction.
It’s what that deal tells us about where accounting is going.
We’re seeing continued consolidation, increasingly large PE-backed platforms, fewer independent brands, and a shrinking middle of the market.
For independent firms, the answer isn’t to become a smaller version of these enormous organizations.
It’s to do the opposite.
Specialize.
Differentiate.
Build a clear brand.
Create an exceptional client experience.
Give talented people room to be entrepreneurial.
The bigger these accounting platforms become, the more valuable those qualities may become for independent firms.
The future may not belong to firms that can do everything.
It may belong to firms that are known for doing one thing exceptionally well. One industry. One service line. One specific group of clients. One distinctive experience.
And doing it better than anyone else.
