By Mark Masson, partner and head of professional services, Lotis Blue
It was a quaint world we lived in when just a few major accounting firms had dipped their toe in the world of private equity investment, and most firms swore allegiance to the independent partnership model. Of course, it’s 2026 now and not 2021: so much changes in just five years.
As of 2026, more than half of the largest 30 U.S. accounting firms have either sold an ownership stake or part of their business to private equity investors. But a push for growth without strongly linking firm goals, partner expectations, and talent strategy, can risk eroding client relationships that are the very springboard for the growth envisioned.
Before the influx of private equity in accounting, leaders’ reasons for such steadfastness in maintaining independence focused on each firm’s unique culture and the strength of client relationships that would presumably crumble under the weight of the push for profits.
But as the number of firms accepting investment grew one by one, so too did the sense of inevitability. How can independent firms remain competitive when constrained by slower moving partnership decision processes, when outbid in an accelerating acquisition and lateral hiring market, or when outspent on the AI and tech front?
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Having hit the proverbial tipping point, it would be a surprise to find any remaining independent major firms that are not having ongoing discussions or are already in the process of closing investment deals.
The need to secure and build client relationships isn’t brushed aside. Rather, leaders argue that investment serves clients’ interests by enabling firms to provide more services with better quality by acquiring the capabilities (through firms and experts) and by leveraging the explosion of AI and technology opportunities. There is much promise in that, and the focus on profitable growth through smart investment is a worthy endeavor, one for which the combination of private equity and accounting firms are uniquely positioned.
But there is also considerable risk. What gets lost, even if only tacitly acknowledged, is that people still have to generate business opportunities and deliver (or at least guide) the solutions, even if they are doing so with one hand tied to a chatbot. That requires human interactions that build trust, but also—importantly—are guided by a clear strategy about where, with whom, and for what purposes to apply those efforts.
Leaders and partners are incredibly astute about client relationships, but they often differ on what’s required to maintain, strengthen, and grow those relationships. Even more critically, private equity and firm executive leadership often differ considerably with client service partners on which relationships are important to strengthen and grow (or even keep at all), given the goals of the firm.
The immediate and relentless push for growth that follows a capital infusion can exacerbate this gap by creating the need (or at least the perception) that any revenue is worth pursuing if it helps meet significantly higher business generation expectations. The misalignment of firm goals, target clients, and partner expectations can delay or even derail growth entirely by creating a lack of focus among partners on the right clients, services, and behaviors.
In fact, these long-term client relationships that are critical to the desired growth can be jeopardized. With future growth increasingly tied to less-annuity driven advisory services, and with pricing pressure rapidly eroding traditional compliance work, it is not a stretch to project that this kind of client erosion could be the cause of losing (and having to make up) more than 30% of current year revenue in the following year just to stay flat.
To be fair, this is not uncommon even among firms that are not private equity-backed when their partner contribution model is disconnected from strategy. But it becomes far more significant when pushed at lightning speed by ambitious growth expectations placed on backed firms.
Firms would help themselves tremendously to establish clarity on three things:
- Define your future target client personas: This includes industry, size, and location. It also includes ownership structure, posture toward engaging advisory services, and the viability created by your firm’s ability to acquire capabilities or build on top of current strengths.
- Design partner and senior roles and compensation strategies that align with firm goals and strategy:
- Elevate client type and overall relationship: Higher revenue should not necessarily lead to higher reward. More revenue and/or a broader range of services with the target clients definitely should. Even slightly lower revenue accompanied by a meaningful shift toward a more desirable portfolio of target clients should likely garner positive reward.
- Reconsider who gets credit: If those generating new opportunities within longstanding client relationships aren’t rewarded, while the long-time “originating” partner continues to receive credit, sustained growth will be hard to achieve. Similarly, those who generate new, quality opportunities should receive some ongoing credit for transferring a stable new relationship so they can focus on developing the next one.
- Develop a modern talent strategy
- Identify and implement 3-5 technology or AI changes: Whether in focused areas or broadly across the firm, digital strategies can collectively drive a 20% impact on client delivery (particularly staffing based on experience and skillsets against type of work and client).
- Rethink the role of your two most junior levels: What do you really need from them? Is it the ability to leverage AI tools? How much and how quickly can you ask and expect problem solving or client relationship management contributions?
- Reshape your leverage model (over time): The traditional pyramid is in the past given the capabilities of tech and AI-enabled tools, which likely means fewer truly inexperienced colleagues going forward. But, how many are necessary, and how quickly can you reshape your numbers at various levels given the pace of tech adoption?
- Assess and adjust your recruiting and early development: Given the new roles and leverage model you are evolving toward, consider whether there are different talent pools you need to explore to find the right junior colleagues, especially given the pace of development that will be required with far fewer of them in the future.
- Adapt your development approach: Faster development toward problem solving and client management, which are more nuanced and experientially learned skills, with fewer years to absorb those practices requires a different development cycle with different tools.
It’s incredibly difficult to drive quality growth, and near-impossible when lacking alignment on the types of clients needed, why they matter, and how the firm will get there. As firms mull the private equity path, or resist it, strong alignment among firm goals, partner expectations, and a tech-enabled talent strategy can be the key to growth and success.
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Mark Masson is a Partner and Head of the Professional Services practice at Lotis Blue Consulting, where he primarily serves Top 75 accounting firms, Am Law 100 firms, and major specialty consulting firms. For more than 15 years, he has advised senior leadership teams and boards on critical firm issues, including growth strategy, firm design, and partner compensation.
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