The Middle Reimagined: How Mid-Sized Firms Can Compete in a Consolidating Market

For years, conventional wisdom has warned that consolidation in the profession is hollowing out the middle tier of certified public accounting (CPA) firms, limiting options for clients and accounting careers. But experts say the reality is more nuanced: The middle isn’t disappearing—it’s being reshaped.

“There’s pressure on the middle, but the pressure just means that the middle needs to ensure it’s remaining relevant,” says Lisa Simpson, CPA, CGMA, vice president of firm services at the AICPA. That relevance, she says, comes down to quality, strategic focus, and a willingness to operate differently than in the past.

The Business of Bigger

There’s no doubt consolidation is transforming big firms into behemoths. Hardly a week goes by without news of multiple mergers and acquisitions (M&As) or private equity (PE) deals.

Allan Koltin, CPA, CGMA, founder of Chicago-based Koltin Consulting Group, who’s advised on more than 300 M&A deals, claims that more than half the top 300 firms have merged up or transformed in the last decade, and the number of billion-dollar firms has grown from seven to 16 in the same period.

INSIDE Public Accounting (IPA) data backs Koltin’s claim. The minimum revenue to make it on the IPA 100 list has doubled since 2010—up from $29.7 million to $60.2 million today.

However, IPA—which collects survey data from more than 600 firms annually—reports that the number of mid-sized firms isn’t decreasing.

According to Chelsea Summers, IPA’s executive director, M&A activity between 2022-2025 hasn’t changed substantially: “It’s not like we’re seeing a big uptick in the number of mergers right now that are consolidating the middle as opposed to previous years—I think it just feels like a panic.”

Between 2020-2025, IPA data shows all firms saw a revenue increase. Koltin says some of that increase is likely due to higher fees, but 93% of it likely has nothing to do with it.

“I call it ‘The Circle of Business Life,’” Koltin explains. “Small local firms become large local firms, large local firms become regional firms, regional firms become mega-regional firms, mega-regional firms become national firms, and national firms become global firms.”

As Koltin notes, CPA firms don’t have a choice in being profitable— it’s necessary to their survival: “It’s the one fact that none of us debate—profitable growth isn’t an opt-in or opt-out choice.”

Why Strategy Trumps Size

But consolidation at the top doesn’t mean fewer opportunities in the middle.

Brian Blaha, CPA, managing director at Winding River Consulting and immediate past chairperson of the Illinois CPA Society (ICPAS) Board of Directors, says mid-sized firms aren’t just being acquired and growing—many are actively examining options. He describes the current environment as one of “strategic optionality,” where firm leaders are taking a pause to decide the path that makes the most sense for their future. Mid-sized firms can still control which path they take—whether taking PE capital or staying independent—but Blaha notes they’ll need to be more intentional about the path they choose if they want to remain relevant.

Simpson says that intention shows up in several key areas: governance, capital, talent, service offerings, and overall firm strategy. She explains that governance structures built for consensus can slow a firm down, and those may need to evolve so leadership can move quickly in a fast-moving market environment. Additionally, capital conversations—once unnecessary in high-growth years— are now essential to fund technology, acquisitions, or experienced hires. Firms must also define what services they’ll offer, how they’ll price them, and which clients best fit their strategic goals.

While some leaders feel intense pressure from consolidation, others, in effect, are saying “bring it on” because their firms are moving ahead with clarity.

There are plenty of opportunities for firms to stay in the middle, Simpson stresses, but leaders can’t assume what worked before will carry them forward: “Running a growing firm isn’t as simple as it was five years ago when clients were beating down their doors.”

Humans Hold the Most Value

Firms must understand how the nature of accounting work itself is evolving.

Blaha points to the “smile curve” concept, where most client value resides at the beginning and end of an engagement (planning and insights) rather than in the technical work that makes up the middle of an engagement.

At one time, the act of preparing a tax return or conducting an audit carried perceived value; today, however, human strategic insights have become more valuable in the eyes of clients as automation and artificial intelligence (AI) reshape tax and audit processes.

Ultimately, mid-sized firms wishing to compete in the marketplace should determine how to infuse more value into each engagement, especially since automation is speeding up processes, Blaha notes. Of course, that speed could bring fee pressures, and because of that, Blaha foresees firms replacing lost revenue with new, more innovative and specialized services that may come down the road in three, five, or 10 years as things evolve. 

Specialization, Advisory Take Center Stage

Firms already well known for offering in-demand services within industries or across the spectrum will have an easier time differentiating themselves in a crowded marketplace, whereas generalist firms may struggle to compete. “It’s becoming increasingly challenging to be everything to everybody,” Blaha cautions.

In fact, with the demand for advisory services continuing to grow, Simpson stresses that mid-sized firms who want to remain competitive are going to need to build out their advisory capabilities, particularly the firms lacking an existing specialization or niche.

Of course, one of the keys to building out advisory services is embracing the power of AI, as the technology is largely expected to reduce manual work, free up time, improve productivity, and create a more fulfilling work environment—all of which allows human advice and guidance to take center stage.

Government Audits: An Area of Opportunity

In addition to adapting and evolving their service lines, mid-sized firms are well-positioned to pursue niche opportunities that larger firms simply won’t invest their time in anymore.

Blaha points to one service line where demand is outpacing supply: local government audits. Many large firms have moved away from the work because audits of local governmental entities are often less profitable, while smaller firms often lack the staff or infrastructure to take on these specialized engagements. The result is a growing shortage of providers.

According to ICPAS’ 2025 Government Report, “Examining the Sustainability of Local Government Audits: Special Report to the Illinois General Assembly,” there were 8,505 units of local government across Illinois—one of the highest in the nation—as of January 2025, but the supply of CPAs available to perform audits for them is nowhere near to scale. To further illustrate the shortage in Illinois, just 290 unique CPAs signed off on local government audits in 2020, and that number dropped to 202 unique CPAs in 2024, according to the report. This is largely driven by consolidation across the profession, retirements of CPAs serving government entities, and the deterrence of complex and burdensome government audit standards.

As a result, municipalities are facing rising fees and limited options. Policymakers are beginning to consider whether certain entities could move from full audits to reviews or other agreed-upon procedures.

For mid-sized firms with the right capabilities and an advisory mindset, the gap represents a clear opportunity.

However, the issue isn’t just staffing, Simpson explains. It’s whether clients are willing to pay for quality. This creates an opening for niche firms to build efficient, high-quality practices. Governmental work may concentrate among firms that prioritize specialization, which is seen as an important avenue to success for mid-sized firms.

Mid-Sized Firms May Have an Edge

Among the criticisms of larger PE-backed firms is the impact on work culture.

According to findings from Accounting Today’s “State of PE in Accounting 2025” survey, just under half of respondents from firms that had taken PE deals reported that their cultures had suffered. The respondents commonly complained that financial results now matter more than the familial, collaborative culture that many firms have prided themselves on.

“Firms that are staying independent are finding a strategic advantage: the ability to attract employees that don’t want to work in a PE environment,” Blaha says.

Further, Simpson says mid-sized firms often have the advantages of more mentorship opportunities and closer access to leadership. But even with these human capital perks, mid-sized firms still need a clear value proposition to offer talent.

“We can’t just hold up our hand and say, ‘Hey, come work for us. We’re cool.’ We must be strategic about why they would want to work for us,” Simpson continues. “We have to make sure that our recruits know we’re going to invest in their learning and development, mentor them, and coach them—mid-sized firms can do that.”

Beyond talent and strategy, mid-sized firms still hold a clearcut advantage: relationships. While large firms often organize around service lines, mid-sized firms can still center their model on the client.

Simpson sees no evidence that clients are avoiding mid-sized firms. Accounting is a relationship business, and clients are attracted to firms they already know: “The Main Street America client is still looking for a firm that’s right there in the community.”

Simpson adds, “I don’t think the future is bleak for mid-size firms in any way. There’s opportunity, it just all comes down to strategy and moving forward with a clear vision of where you want to go, what you want to do, and what’s going to provide the most value to your clients.”

Ultimately, the future of the middle may depend less on size and more on clarity. Firms that define their strategy and act decisively may find opportunities where others see pressure.