Blackstone has acquired a significant stake in top 20 tax firm Citrin Cooperman, Wall Street Journal reported. The deal, announced Jan. 7, involved New Mountain Capital selling its majority stake in Citrin Cooperman to an investor group led by Blackstone. This transaction is the latest example of private equity's closer involvement in the accounting profession.
As Trusted Professional reported in November, accounting firms are turning to private equity for the funds needed to invest in technology and talent. However, these partnerships are raising questions about auditor independence and regulatory compliance.
According to the Journal, the transaction values Citrin Cooperman at over $2 billion and gives Blackstone a 40-45% stake in the firm. This transaction follows New Mountain’s 2021 acquisition of the firm, which helped propel Citrin Cooperman’s revenue from $351.8 million in 2021 to approximately $900 million in 2024, largely through strategic acquisitions.
Private equity firms, including Blackstone, are drawn to accounting firms for their steady revenue streams and growth potential. This interest aligns with a wave of recent investments in midsized U.S. accounting firms. In June, a group led by Hellman & Friedman acquired a stake in Baker Tilly, with Blackstone participating in the debt financing of that deal. Other firms, like Grant Thornton and Armanio, have also pursued private equity partnerships to fund growth initiatives, according to the Journal.
The Journal said that Blackstone’s investment in Citrin Cooperman underscores a broader trend: accounting firms are reexamining their ownership structures amid rising costs for technology and staff recruitment, as well as partner retirements. Some firms have turned to private equity, while others have explored alternative solutions, such as employee stock ownership plans or mergers, the Journal said.
However, the growing ties between private equity and accounting firms have sparked regulatory scrutiny. Certified public accountants must retain primary ownership of audit practices, as required by U.S. licensing laws. To navigate these restrictions, private equity investments often focus on firms’ non-audit arms, which provide administrative services to the audits units for a fee. While this structure complies with existing rules, regulators, including the Public Company Accounting Oversight Board and the Securities and Exchange Commission (SEC), are closely monitoring these relationships, the Journal stated.
Regulators have expressed concerns about potential conflicts of interest and the perception that private equity influences could undermine auditor independence, the Journal reported. SEC Chief Accountant Paul Munter had urged firms to be cautious about such arrangements, emphasizing the importance of maintaining public trust in the profession.
Despite these challenges, private equity has delivered tangible benefits to some firms. According to Inside Public Accounting, revenue at firms like Citrin Cooperman, EisnerAmper and Cherry Bekaert—all of which received private equity funding in 2021 or 2022—increased by 50% as of August 2024 compared to the previous year. This growth is often driven by consulting services, which appeal to private equity investors seeking high returns.
As the accounting industry continues to adapt to private equity’s influence, firms must strike a balance between leveraging new investments and upholding the profession’s standards of independence and integrity. The Citrin Cooperman deal highlights both the opportunities and complexities of this evolving landscape, the Journal stated.