What is a CA Firm Really Worth?

As Indian businesses expand globally, regulatory complexity increases and clients increasingly seek integrated, technology-enabled and multidisciplinary professional services, the traditional model of the small, partner-centric practice is being challenged. There is consequently a growing conversation and market need for mergers, consolidation and the creation of firms of scale, width and depth. The aspiration is not merely to create larger CA firms in terms of headcount or fee income. It is to build Indian professional institutions with the depth, geographical reach, specialist capabilities and institutional resilience to serve businesses of increasing size and complexity.

But mergers require something that the profession has historically not needed to discuss with the same intensity: valuation. A Chartered Accountant may spend decades building a practice. Clients are acquired, relationships deepen, people are trained, systems are established and a reputation is painstakingly built. Yet when the time comes to admit a new partner, merge with another firm, induct the next generation or plan succession, one deceptively simple question arises:

What is the firm actually worth?

The question is more difficult than it appears.

In a conventional business, valuation can draw upon tangible assets, profits, cash flows, intellectual property and market comparables. A professional services firm is different. Much of what makes it valuable does not appear on its balance sheet. The office may be worth relatively little. Computers and furniture are hardly significant. Even the firm’s accumulated knowledge cannot simply be transferred to a buyer.

What is being valued, therefore, is largely the capacity to generate future professional income.

And that capacity has several components: client relationships, recurring assignments, brand and reputation, referral networks, systems and processes, quality of personnel, specialised expertise and, perhaps most importantly, the confidence that clients will continue to choose the firm even when the partner who originally brought them in is no longer there.

In 2025, Baker Tilly and Moss Adams agreed to merge in a transaction valued at approximately US$7 billion, creating the sixth-largest accounting firm in the United States¹. Considering that the two firms together had around US$3 billion of revenue in 2024, it is evident that investors are not simply buying today’s fee income; value is also attached to recurring revenue, client relationships, people, capabilities, technology, brand and the potential to create additional value through scale.

1. https://www.reuters.com/markets/deals/baker-tilly-moss-adams-set-merge-7-billiondeal-wsj-reports-2025-04-21/

But the uncertain future presents a central paradox of professional-firm valuation: the asset that generates the revenue may be inseparable from the individual who generates it.

Therefore, the quest towards valuation should not begin by asking “What multiple of fees should my firm command?” but by asking “How much of my firm’s future earning capacity would survive if I were no longer there?”

That question brings valuation closer to the economic reality of professional services. A practical valuation can examine three questions:

First, what are the maintainable earnings? Historical profits need to be normalised for exceptional items, partner remuneration and one-off assignments. The objective is to establish the earnings that a successor could reasonably expect to maintain.

Second, how transferable is that income? Recurring statutory audits, tax retainers and established institutional assignments may have greater continuity than one-off advisory mandates. Revenue can be classified as institutionally owned, partner-dependent, repeatable or highly personal. The more revenue survives a change in personnel, the stronger the case for attributing value to the firm.

Third, what risks attach to those earnings? Client concentration, dependence on a few partners or referral sources, staff attrition, succession gaps, regulatory constraints and professional liabilities should influence the valuation.

A simplified framework could therefore be expressed as:

Enterprise Value = Maintainable Earnings × Appropriate Multiple ± Specific Adjustments

The multiple should not simply be borrowed from another firm’s transaction. It should reflect growth, recurring revenue, client retention, institutionalisation, profitability, succession depth and risk.

Maintainable earnings is a variable of the extent of institutionalisation. Documentation, technology, delegation, second-line leadership, client diversification, knowledge management and institutional branding may sometimes appear to be overheads. In reality, they are investments in the firm’s transferable economic value.

The ultimate test of scale is therefore not how many partners a firm has or how many crores it bills. It is whether the institution has acquired an economic life of its own and whether that value can outlast its individual partners.

Scale may create the opportunity. But institutionalisation is what creates value.