By Kristen Rampe, CPA, Rosenberg Associates
As private equity (PE) continues to reshape the accounting profession, partners at firms that intend to remain independent are increasingly reexamining their internal buyout structures. A central question has emerged: should partner buyout multiples be adjusted to reflect the significantly higher valuations available through external sales to PE or other firms? For many partners, the answer carries meaningful implications, not only for firm strategy and long-term sustainability, but for the retirement value they have spent decades building.
Current Buyout Changes: Poll Results
To better understand how private equity is influencing partner buyout structures, we surveyed accounting firms across a range of sizes and ownership models. The responses revealed no single path forward. Some firms have reduced buyout multiples or restructured their plans to preserve affordability for remaining and incoming partners. Others have moved in the opposite direction, increasing buyout multiples or adjusting related terms to more closely reflect external market valuations.
Firm Leader Comments
Related to increased buyouts and related valuation tactics:
- “Increased the multiple of comp from 2x to 2.5x.”
- “Shorter buyout period.”
- “Changed the terms for valuation. In the past, it was based on revenue; current is based more on profitability.”
- “Increased the value of the payout.”
Related to reduced buyouts and related succession tactics:
- “Reduced buyout percentage to make retirements more affordable to new partners. Added a cap for the total amount we will pay each year to retired partners.”
- “Lowered total payout amounts. Increased vesting.”
- “Reduced the buy-in price to make it more appealing.”
- “Added mandatory retirement”
- “Set minimum number of years as a partner and age to fully realizing benefit.”
Claw Backs
A number of firms expressed growing interest in adding a claw back provision to their partner buyout plans. A claw back allows retiring partners to participate in any incremental value realized if the firm is sold during their payout period, while preserving full strategic flexibility for remaining partners to pursue a transaction when timing and conditions are most favorable.
Despite this interest, adoption remains limited. Only 14% of respondents reported having a claw back provision currently in place, suggesting a significant opportunity for broader consideration across the profession. Other buyout features currently included in respondent plans are summarized in the chart below.
Contemplated Future Buyout Changes
Looking ahead, 40% of respondents indicated they are considering changes to their partner retirement or buyout plans. Of those firms, 71% cited PE’s increasing presence in the profession as a primary driver behind potential updates. Changes some firms are contemplating:
- “We are looking at the steep discount of the buy-in relative to PE multiples and are considering increasing deferred comp benefits and/or accrual basis buyout (or a combination of the two).”
- “It is possible we will look at the PE effect, but the multiple we would receive from PE would really drive up the retirement payouts, and we’re not sure we would like to do that from a long-term viability standpoint.”
- “Undetermined [on changes], but the difference between external market valuations and the partner retirement structure is too wide to ignore.”
- “Having more correlation between value creation and capture. Taking over a book of business is not creating value.”
- “Clarifying how the calculations are done. Perhaps reducing the amount slightly. We are committed to remaining independent.”
- “Claw back and considering slightly higher retirement payouts.”
- “Considering options for liquidity but still allow semi-independence. Concern is for the funding of retirement payments by next group of partners.”
- “Mainly a higher up front payout of firm value rather than a much longer payout over time.”
- “value clawback to redeemed partner if firm sold afterwards at higher value formula vers partnership agreement”
- “Make the buy in price more appealing by lowering it”
Evaluating Your Position
Any changes to a firm’s retirement or buyout plan should be grounded in strategy, not reaction. Firm leaders should begin by assessing the current health of the practice: overall profitability, capital needs, leadership depth and the strength of succession planning. Equally important are the financial expectations and legacy objectives of partners approaching retirement.
The most effective decisions align with a firm’s values and long-term vision. While PE may offer the highest immediate economic value for some firms, that path is not universally appropriate. Many owners place significant weight on continuity, culture and client relationships, priorities they believe are best preserved through independence.
Revisiting a buyout structure is inherently complex, particularly amid a growing range of exit options. Firms that take a deliberate, well-informed approach will be better positioned to balance fairness, sustainability and long-term value for both current and future partners.
