In new research, John M. Barrios and Inna Abramova show how private equity’s rising involvement in accounting and other professions is concentrating markets and breaking down barriers to conflicts of interest.
Firms in professions like accounting and law have traditionally operated differently from ordinary businesses. Ownership was limited to licensed professionals, firms were run as partnerships, and outside investors were kept away to uphold higher standards of independence and trust. But this distinction is fading. Professional service firms in sectors like healthcare, law, and accounting have been rapidly turning to private equity as a means of increasing capital. This shift not only transforms professional practices, but also raises significant policy implications, as it challenges existing regulatory and antitrust frameworks. In a new NBER working paper, Inna Abramova and I examine how this shift is reshaping the accounting profession and its potential wider implications. Accounting serves as a clear test case for what happens when financial capital enters markets built on licensing and reputation. The results are pronounced: private equity brings scale and investment, but also market power.
Why accounting matters
Accounting plays a special role in our economy. Auditors act as gatekeepers for financial information. Their opinions are what give investors, regulators, and markets the confidence to trust what companies report. To protect that responsibility, accounting firms have traditionally been owned by certified public accountants(CPAs), who share profits and keep outside equity investors at arm’s length. These rules were meant to ensure that those in control had a reputation to protect and to prevent financial incentives from interfering with professional judgment. Decades of research in accounting and corporate governance have stressed how important this is.
Private equity has found ways around these limits
Over the last two decades, with a sharp acceleration since 2020, private equity has increasingly invested in the accounting industry through complex ownership structures. Partners acquire non-CPA advisory and management entities affiliated with audit practices, roll up regional firms into multi-state platforms, and centralize technology, branding, and operations. On paper, the firms’ independence rules remain intact. Economically, however, the control of the partnership looks very different.
This pattern is similar to what’s happening in healthcare, where private equity ownership has been linked to consolidation and price increases. Just as in the accounting industry, physician practices often increases their billings after being rolled up by private equity, leading to prices hikes for services that were once more predictable to patients. Similarly, in law, private equity investors are increasingly controlling management services organizations while nominally respecting restrictions on non-lawyer ownership, potentially changing the incentives of these law partnership.
What the data show
Using data that links private equity transactions from 1999 to 2024 to accounting firms, labor markets, mergers and acquisitions, and audit fees, we document three core patterns. First, private equity investment in accounting has accelerated sharply, with deal activity more than doubling relative to the prior decade. Deals are concentrated in mid-sized and large firms, particularly those registered with the Public Company Accounting Oversight Board and serving public clients. These firms are big enough to serve as platforms but small enough to be restructured.
Second, after private equity entry, accounting firms scale quickly. Employment expands by roughly 40 percent within two years, and firms shift decisively toward scalable non-audit services such as tax and consulting, which increase by more than 10 percentage points as a share of revenue. Consolidation accelerates as well: the likelihood that a firm completes an acquisition within three years of PE entry rises by 30 to 50 percentage points, with many of these deals spanning state lines. These changes are consistent with a familiar private equity playbook: build platforms, consolidate fragmented markets, and create scalable revenue streams.
Third, and most important from a competition perspective, these changes translate into plausible market power. After private equity entry, local accounting labor markets become more concentrated. Within five years, affected metropolitan areas are 8–12 percentage points more likely to fall into the top decile of employer concentration in tax and financial analysis roles, indicating that a small number of firms increasingly dominate local employment, narrowing employees outside options. This pattern aligns closely with a growing antitrust literature emphasizing labor-market concentration and monopsony power as central channels through which consolidation affects competition. On the client side, prices rise even in settings where quality and effort are tightly regulated. We examine the audits of employee benefit plans governed by the Employee Retirement Income Security Act, a highly standardized service with limited scope for discretion. Following a private equity investment, audit fees increase by roughly 7–12 percent within the first year for the same auditor–plan pair, and by 20–30 percent within three to four years relative to closely matched counterfactuals. Because the rules governing these audits change little and client characteristics are stable, these fee increases are difficult to reconcile with more intensive or higher-quality audits. Increased market power is the more plausible explanation.
The broader pattern: financialization of the professions
Accounting is not an outlier. It is a clean example. The same dynamics are visible in healthcare, where private equity roll-ups of physician practices have drawn scrutiny from the Federal Trade Commission, and in law, where firms increasingly rely on private capital through management companies and financial engineering. In each case, regulation focuses on formal ownership and professional responsibility, while economic control shifts through contracts, affiliates, and scale.
This is best understood as a process of financialization: the transformation of professional services into platforms optimized for growth, consolidation, and returns to capital. Financialization does not necessarily reduce quality. In many cases, it brings investment, technology, and operational efficiency. But it also changes incentives, and those changes matter for competition.
Traditional antitrust analysis often misses this shift because it looks for direct ownership, explicit mergers, or price fixing. Professional services challenge that framework. Consolidation happens through roll-ups, add-on acquisitions, and shared service platforms. Market power shows up in labor markets and standardized pricing, not just in consumer-facing products.
Why antitrust should care
From an antitrust perspective, professional services present two blind spots. The first is labor. Antitrust enforcement has historically focused on product markets, but in professions, labor is the critical input. When a handful of firms dominate local labor markets for accountants, lawyers, or clinicians, they gain leverage not just over workers, but over the capacity of the industry itself. Comparing wage suppression in these markets to classic consumer price concerns highlights why labor deserves equal footing in antitrust analysis. For instance, while consumer prices might rise modestly, wage stagnation or decline can have a much larger impact on the well-being of professionals in the sector. This concern has been increasingly emphasized by the FTC and Department of Justice’s joint antitrust guidance on labor markets.
The second is regulatory arbitrage. Ownership restrictions are treated as safeguards against concentration and conflicts of interest. But when capital can achieve effective control without formal ownership, as seen through management agreements, shared infrastructure, and financing arrangements, those safeguards lose force. Market structure changes that do not trigger regulatory review resemble the concerns raised in recent work on “stealth consolidation.” Accounting makes this tension explicit. Independence rules remain on the books. Yet consolidation accelerates and pricing power rises in standardized audits. The rules preserved the form of professionalism, but not the competitive structure.
What does this potentially mean for policy
The policy question is not whether private equity should be banned from professional services. That would be neither realistic nor desirable. Capital can play a constructive role in modernizing professions that face rising technology costs, regulatory burdens, and demographic pressures.
The real question is whether antitrust and professional regulation are keeping pace with how capital actually enters these markets. Today, both regimes remain anchored to formal ownership and discrete transactions. But modern consolidation rarely takes that form. Control is exercised through platforms, management agreements, and serial acquisitions that individually fall below reporting thresholds but collectively reshape market structure.
A serious response requires shifting attention from simple ownership to who has effective control, in other words, from the legal form to real economic effects. It means viewing labor-market concentration as a first-order competitive harm rather than a secondary concern. It means scrutinizing roll-up strategies even when no single acquisition appears consequential, and it means recognizing that even highly standardized services can sustain strategic pricing once competition weakens. Practically speaking, policy tools such as expanded reporting thresholds, new definitions of control that encompass economic influence, and mandatory disclosures related to management agreements and affiliations could be considered. Additionally, adopting frameworks similar to those used in assessing market power in labor markets, which account for both employer dominance and employee outcomes, would help align current antitrust approaches with the evolving landscape in professions.
Accounting provides us with early evidence of what happens when we fail to do this. Healthcare is ripe with evidence, and law seems next in line. Professional services, such as medicine, law, and accounting, were built on trust, expertise, and independence, not because these values are sentimental, but because they are economically necessary. Financial capital can coexist with them. But only if our policies internalize the tradeoffs involved. Ignoring the competitive consequences of financialization is not neutrality. It is a policy choice, and one that is increasingly favoring concentration over competition and financial interests over markets.
Author Disclosure: The author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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