When Private Equity Buys a Firm It Cannot Own Outright

When a private equity firm agrees to buy a controlling stake in a business, the deal usually transfers ownership of the whole company. The June 2026 agreement between KKR and Crowe, one of the fifteen largest accounting firms in the United States, does not work that way. KKR is buying a majority of part of Crowe, while the rest stays under the ownership of the firm's certified public accountants. The reason is a rule that bars outside investors from controlling the audit work, and the solution is a structure that any owner of a regulated or licensed business should understand before taking outside capital.

The Deal That Frames the Question

Crowe, a Chicago firm that has operated for roughly 80 years, reported about $1.4 billion in revenue across 539 partners and more than 5,600 employees. In June it agreed to take its first institutional capital partner: funds managed by KKR will make a significant equity investment in a newly formed entity called Crowe Advisory LLC, in a transaction reported to value the business at close to $3 billion. KKR is investing through its North America Fund XIV, and the deal is expected to close in the third quarter of 2026, subject to regulatory approvals and standard closing conditions.

The notable part is what happens before closing. Crowe is reorganizing itself into two companies. Crowe LLP will remain a licensed CPA firm owned by accountants, and it will continue to perform all attest services, meaning audits and reviews, the work that carries a public-trust function. Crowe Advisory LLC will house the tax, consulting, and other non-attest services, and that is the entity KKR is buying into. The firm is being split so that the regulated work and the investable work sit in separate boxes.

The Rule That Forces the Structure

In the United States, a firm that performs audits cannot be majority-owned by people who are not certified public accountants. The requirement protects auditor independence: an audit is only useful to lenders, investors, and regulators if the people signing it answer to professional standards rather than to a financial owner who might benefit from a favorable opinion. A private equity firm taking control of an audit practice would compromise that independence on its face, so the rules simply do not allow it.

That single constraint shapes the entire deal. KKR cannot buy the audit business, so the audit business is carved out and left with the CPAs. Everything the rules permit an outside investor to own, the tax and advisory work, is moved into a separate company that KKR can control. The price, the financing, and the growth plans all follow from this division. The structure is not a tax nicety or a cosmetic reshuffle; it is the thing that makes the investment legally possible at all.

How the Two-Company Structure Works

The arrangement has a name in the profession: an alternative practice structure. The licensed CPA firm keeps ownership of the attest work and supervises it through its own partners. The separate services company, owned in large part by the investor, holds nearly everything else, including the people, the offices, the technology, and the back-office functions like billing and collections. The two entities then sign a services agreement, under which the advisory company provides staff and infrastructure to the CPA firm in exchange for fees. In practice the same professionals often serve clients across both entities, but the ownership and the formal control are divided along the line the rules require.

This model is not unique to accounting. Owners of medical, dental, and veterinary practices have used a close cousin of it for years, often called a management services organization paired with a professional entity. The licensed professionals own the practice that delivers regulated care, while an investor owns a management company that provides everything around it and collects a fee for doing so. The legal labels differ by industry and by state, but the logic is identical: separate what the rules say must stay in licensed hands from what an outside owner is free to buy.

Independence rules do not stop neatly at the boundary of the attest firm. They reach, at least in part, into the services company and its investors, because regulators care about whether an outside owner could influence the judgment behind an audit. The American Institute of CPAs is now revising its code of conduct to draw a clearer line between an investor's significant influence over the non-attest business and actual control over the attest work. The structure works only as long as that separation holds up under scrutiny.

Why Professional Services Draws This Capital

Private equity's interest in firms like Crowe is not hard to explain. Accounting, tax, and advisory work produces recurring revenue: clients come back every year for the same filings, audits, and compliance work, which makes future cash flow easier to forecast than in most businesses. Predictable revenue supports more borrowing, and accessible debt improves private equity returns. The sector is also fragmented, with thousands of independent firms, which gives an investor room to build a larger platform through follow-on acquisitions.

The result is a wave of activity. By early 2026, close to half of the thirty largest U.S. accounting firms had taken some form of private equity investment or adopted an alternative practice structure. Baker Tilly became the sixth-largest firm in the country after combining with Moss Adams. One industry count found that fewer than 200 direct private equity investments in accounting firms had generated roughly 900 follow-on transactions in 2025, an average of more than seven additional deals per platform, and January 2026 set a record for the number of these transactions in a single month. The trend now extends well beyond accounting into law-adjacent services, engineering, and other licensed fields.

What It Means for Owners Beyond Accounting

The lesson for business owners is not about accounting specifically. It is that when a regulated or licensed business takes outside capital, the deal structure does much of the work, and the structure carries trade-offs that the headline valuation hides. An owner evaluating this path should look past the price to how control is actually divided, what the services agreement obligates each side to do, and which assets stay in licensed hands.

The risks are concrete. The core value of a professional firm walks out the door every evening, so investors worry about partners leaving and taking client relationships with them; retention packages and non-solicit terms become central to the deal rather than afterthoughts. Independence and licensing rules constrain how far an investor's control can reach, and an aggressive structure that blurs the line invites regulatory challenge. Insurance and compliance costs tend to rise. And private equity is not a permanent owner: the firms that took the earliest investments are now approaching the point where their backers will look to sell, which means a second change of control may arrive within a handful of years. Owners who understand these dynamics before signing are better positioned than those who focus only on the multiple.