Call it a tax trifecta: In just eight years, WTAS has roughly tripled its revenues, its number of partners and its client base.
That growth, while certainly gratifying, is not the main point, according to chief executive officer Mark Vorsatz: "My goal wasn't to have a big firm; my goal was to have a great firm. Our goal should be to be the best in class - to be the
What it's serving as a benchmark for is tax services of all kinds - in both compliance and planning for individuals and businesses, and in areas that are relevant to tax, such as valuation and wealth management.
The tight focus on tax lets the firm concentrate on building deep expertise, and also liberates it from the conflicts of interest, both regulatory and personal, that having other service lines can bring. "We want to be a tax-only firm," said Joe Karczewski, the managing director of WTAS's Chicago office. "We all had experiences where we were constrained in doing what we wanted to do. ... Without an audit practice, we avoid a lot of the regulatory issues that other firms have." As a corollary benefit, he added, "We get referrals from audit firms, because we're not conflicted out and we don't have an audit practice, so we're not a threat to them."
What's more, regulatory changes and the growing complexity of business have made the last decade an ideal time for a firm with WTAS's unique combination of expertise in individual and corporate tax work, according to George Lyons, managing director of its New Jersey, Philadelphia and Harrisburg practices. "Private companies have become more complex," he said, and there has been a significant increase in private equity investment in private companies. On top of that, "SOX has provided a great opportunity for us" - not least by causing many large accounting firms to de-emphasize, or even drop, their tax practices, particularly for individuals.
That the Sarbanes-Oxley Act should be a boon to the firm is appropriate, as the very events that gave rise to the law also led to the formation of WTAS.
OUT OF ANDERSEN
In the dark days of 2002, with Arthur Andersen under indictment over its audits of Enron, Vorsatz, who was a tax partner at the Big Five firm in charge of the Private Client Services Group in its San Francisco office, began to think about a future outside what was soon to become the Big Four.
He and a group of like-minded Andersen partners began meeting with potential backers for an independent firm that would, at least at first, focus largely on tax issues for high-net-worth clients. They eventually went with international bank HSBC, which had a strong global platform, and was ready both to support them and to give them a great deal of freedom: The new-born WTAS had operating autonomy, and its partners had both a majority on its board, and the power to choose their CEO - Vorsatz.
While the relationship gave WTAS a strong launch, HSBC's strategy in the U.S. eventually changed, and after talks in 2007, the bank and the tax firm agreed to separate, with HSBC itself providing the funding for a management buyout by WTAS's partners.
In the meantime, of course, WTAS hadn't been standing still.
"Most of the original group were serving high-net-worth individuals," Vorsatz explained. "Two or three years in, we started actively recruiting corporate and geographic depth and more service capabilities - federal business tax, the corporate area, international tax, state and local taxes, valuation services, and compensation."
Currently, about 55 percent of the firm's revenues come from the individual side, and 45 percent from the corporate side.
"We're also pursuing middle-market public companies" in the Fortune 500 and 1,000, Karczewski pointed out, and the firm has been ramping up to serve them. Over the past three years, the partner group has increased by 50 percent, mostly on the corporate side.
Perhaps just as important has been the firm's geographic growth, with a strategy aimed at major metropolitan areas. "We're not interested in markets where we can't have 50 people in tax," Vorsatz said. By his estimation, the firm is well on its way to penetrating all those markets in the U.S., with only Atlanta, Dallas, Houston and possibly Phoenix still to go - as well as the rest of the world. "We still want to build outside the U.S.," he said.
A FUTURE IN TAX
The ever-increasing complexity of private companies, clients' growing international exposure, the tax ramifications of the "greening" of the U.S., and the recent jump in state tax enforcement activity are just some of the areas where WTAS sees growth going forward.
In pursuing those and other opportunities, one of the firm's priorities will be deepening the skill sets in its current offices, and the interaction between them. While there is already a fair amount of integration among its offices and service lines, the firm would like to see more. To that end, about 18 months ago WTAS started organizing its practice from both a regional perspective and around its three client groups (PCS; alternative investments, which includes hedge funds, private equity, real estate and so on; and the corporate practice), with leaders responsible for driving business in each geographic and practice area.
"We've organized a group around early-stage companies, with an integrated approach, to create an area where we can incubate market share," Vorsatz said. "We'll try to replicate that approach in different environments. We're already planning something similar around middle-market companies."
"We're going out as a group, and going to the market as a firm," said Lyons. "It's becoming more of a routine thing. We'd like that to be institutionalized."
"One of the things to keep in context is that we've only been around for eight years," Vorsatz said. "I can't think of a firm we compete with that hasn't been around for 50 years."
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