Day Two Keynote: What Private Equity Has Done for Us

In this compelling Day 2 keynote panel, leaders from three firms that have embraced private equity funding share their experiences and insights. They will discuss the motivations behind their decision to take on private equity, how the reality of the partnership aligned with or diverged from their initial expectations, and the lessons they've learned along the way. Offering candid reflections on the impact of private equity on their firms' growth, operations, and culture, these leaders will provide valuable advice for other firms considering a similar path. This session is a must-attend for anyone interested in understanding the real-world implications of private equity in the accounting industry.

Transcription:

Daniel Hood (00:10):

Morning. Morning all. Thank you for coming back.

Lee M. Cohen (00:15):

They weren't lying about the lights. It is yet. Sorry.

Daniel Hood (00:18):

It is very, very bright. I want to get y'all ready for today. Just a reminder about CPE, if you're looking for CPE, there's a little hum there. Don't forget to get scanned in at the beginning of each session. And then at the end of the event, there'll be a QR codes up on here. There'll be on the app. There's also on our account day website. Under events, under the PE summit, there's a section for getting your CPE form. There's one form you need to fill out when the event is over. Send that in by the 25th and we'll get you certificates for all your CPE. I'm super excited about this panel. We talked a lot yesterday, a lot of experts. Our co-chairs were great at sort of setting the landscape of what PE in accounting looks like. But today, all through our sessions today, but particularly for this one, we're getting down on the ground, getting in the trenches to find out what it really means within accounting firms and for PE firms that cooperation, that partnership.

(01:16):

And we're kicking it off today with a fantastic panel of firm leaders from firms that have had PE deals for a while. So they have had a chance to bed them down to figure out what works, what surprised them, what was exciting about it, things they needed to work through, all that sort of stuff. We're excited to have that. So I just want to dive right in. I'm going to introduce everybody and actually have them introduce themselves in a little bit more detail. But Avani Desai of Schellman, thanks for joining us. If you could tell us a little bit about your firm.

Avani Desai (01:42):

Yeah, sure. Well, great to be here. Thank you. So Schellman is a top 50 CPA firm. We started in 2002. What's unique about us is we are the only CPA firm that just focuses on cybersecurity assessments, assurance, and attestation. So no tax auditor advisory. And we went through a PE transaction. We might've been number three, about 2021.

Daniel Hood (02:04):

Excellent. Alright, I'm just going to go and just sort of order the chairs, but Dan Rinehart of WSRP, thanks for joining us. Tell us a little about yourself and your firm.

Dan Rinehart (02:11):

Thanks for having me. I'm the CEO of WSRP. Historically, we've been about 20 plus million in revenue and 120 ish employees. As a result of a few acquisitions that we've done. We're now, we'll be trending in 2025, maybe 65 to 70 million of revenue, 350 employees. And we serve all markets, audit, tax, and business valuation. Pretty much everything that you'd think a CPA firm does. That's what we do.

Daniel Hood (02:43):

Awesome. Alright, next up is Collin Hill. He's the CEO and MP of Cherry Bekaert and LLP. Collin, thanks for joining us.

Collin Hill (02:49):

Thanks, Dan. Collin Hill. Good morning everyone. The CEO of Cherry Bekaert LLP, which is our test practice under our alternative practice structure. The firm overall, our target run rate that we believe we'll hit towards the end of this year is 700 million. We have about 175 partners, about 2,400 employees, and just a traditional accounting firm with the audit, tax and advisory practices.

Daniel Hood (03:15):

Awesome. Alright. And rounding out the panel. Lee Cohen of LMC Advisors.

Lee M. Cohen (03:20):

Good morning everyone. Lee Cohen, the CEO of LMC advisors based out of New York City. We're going to end up this year at about $40 million in revenues. When we did our PE transaction a year and a half ago, we were about 20 million. So we've had a lot of growth and like the others, a traditional accounting firm providing traditional services to New York markets.

Daniel Hood (03:48):

Awesome. One of the reasons we were excited to get this mix of partner, as you represent wide range of sizes, you've all had your deals in place for a long time, but I want to go back before the deal was in place and talk a little bit about, maybe you can kick us off here, is what led you to taking on PE? How did you come to the conclusion that that was the path you wanted to follow?

Avani Desai (04:07):

Yeah, so I'm going to say it was an unlooked opportunity for us. So when we started in 2002, we were owner operator led, about 78% owned by our founder. What we started realizing, so our revenue we're about 175 million in revenue, about 500 employees saw a significant growth during covid, primarily because we've always been remote. First one thing that started happening was he continued to let the partners, we have only 18 partners at the firm, he continued to let the partners buy in. Even at one times revenue started getting really expensive. So in 2021, what we realized was it was time to look outside Eisner, Amper and Citrin Cooperman had just gone through their deals and it truly was an unlooked opportunity. We didn't do the dog and pony show, we sole sourced it with Lightyear Capital. We knew them primarily because we were doing all the cybersecurity assessments for their portfolio companies. And we actually closed in 38 days. It was a pretty quick due diligence in closing. So we went through, yeah, so October 1st, 2021, we had our deal and our founder completely exited, no earnout or anything. And then I took over from President to CEO and that's when the fun started.

Daniel Hood (05:21):

There you go. I didn't realize it was that short of window. That's amazing. You hear some deals going on for a year, two years, that sort of thing. So that's fascinating. Collin, what about with Cherry Bekaert?

Collin Hill (05:33):

So one of the things that we've always talked about within our firm is that we owe it to our partners to always know what's going on in the profession and always listen and be educated on what's happening. And so as we started getting phone calls, we knew that we didn't really understand or know exactly what it was at that point in time. This was in 21. And then in 22, we really proceeded down the path and we had a strategy in place. We really liked our strategy, we wanted to continue to execute on it, but we were really looking for something to kind of put fuel on the fire. And so we started answering phone calls, started having discussions. I felt like our process was relatively quick as well. Really ramped up the beginning of 22, closed in the middle of 22 with Parthenon Capital, and really the idea was just to, like I said, put fuel on the fire for our strategy.

Daniel Hood (06:32):

And it has you guys more or less doubled last year if I remember my numbers. So been, I'd call that a big fire. That's awesome. Dan, how about WSRP? How did you guys figure out that you wanted to go with PE?

Dan Rinehart (06:45):

So yeah, good question. WSRP, we'd always been approached for a long time about people that wanted to merge with us or acquire us. And private equity was one that we had considered, but we'd always said no. We said, well, we kind of want to maintain our independence and we're just not sure if that's what we want to do. And we just kept saying, no, no, no. And finally we said, well, we ought to at least know what we're saying no to. We ought to at least entertain it and see if it makes sense. And we also were looking at a long line of, I'm not going to say older partners, but seasoned partners, right? Seasoned partners, they were seasoned partners and that deferred comp liability was getting large. And so it was something that we started looking at and after we looked at it, we said, oh, this just makes a ton of sense. It's a win for us. It's a win for our private equity partner. It's a win for our employees. It's a win for our clients. It was just a win for the retired partners. It was just a win all the way around.

Daniel Hood (07:55):

Awesome. Very cool. And I should say from talking beforehand, we did some prep calls for this and it's pretty clear that I think you're all, let's say you're all pleased with the deals. We don't expect to find a lot of, it was terrible. We're tearing it up here on stage. This is your first notice because it's worked out very well for all of you. Alan talked about, Alton talked yesterday about as we go down the line, some of the deals that come later in the process may not end up seeming as successful, but certainly for all of you guys, it's worked out really well. Lee, I didn't get your story though. How about LMC?

Lee M. Cohen (08:28):

I was not even considering pe. I didn't even understand really what it was, but I got a cold email from Ascend and it really hit me hard because they're people first philosophy and that's the one out of 50 emails that I decided to respond to. And I really liked what they had to say surrounding people surrounding vision and strategy. And we closed rather quickly, not 38 days. I can't believe you did that in 38 days, but like a three month process. And I knew I needed to do something. We were growing too rapidly and I was feeling really stuck as a managing partner of the firm. And I could tell my staff was feeling a little stuck and all that really made me make this decision and I feel it's been great for us.

Daniel Hood (09:22):

Gotcha. They were talking about at the breakfast session, they were talking about the sort of things that private equity can handle for you. So when you say being stuck, you're talking about things like you're spending time on back office functions, hiring, recruiting, that kind of stuff. Is that where you were?

Lee M. Cohen (09:34):

All of that stuff.

Daniel Hood (09:35):

Gotcha.

Lee M. Cohen (09:36):

They've taken a lot of that off my plate and have really enhanced many areas, HR technology. It's been great.

Daniel Hood (09:47):

Excellent. Well, I want to dive more into that, those kind of changes. Collin, maybe you can tell us a little bit about how things have changed at Cherry Bekaert.

Collin Hill (09:54):

Yeah, so part of our strategy at the point in time that we took on the investment was really growing our advisory business. And so as we were in the marketplace looking at these businesses, a lot of the transactions were happening on a cash basis rather than the deferred comp model that we had. So we were struggling to compete. So first thing is the access to capital, and that's what we were really after, as I mentioned, to kind of pour fuel on our strategy. But a lot of other things have changed in the process as well. Under our old model, we really did, I would say we focused on short-term earnings and partner distributions more so than we should have rather than long-term investment. And I think this has helped us kind of shift that mindset. A good example or two good examples. We have two large technology projects that we've embarked on.

(10:51):

We're in the middle of right now that I think under our old model, we'd probably still be sitting here deliberating about whether we should spend the funds on that. And so there's a lot of other things from a talent perspective, we have a co-investment program now that we're able to push down equity ownership below the partner level, which is very attractive to the younger folks. The other piece was talked about yesterday, allowing our partners to de-risk along the way and not waiting until that carrot at 65 that pays out over a period of time. So a lot has changed, but those are a few of the items that are big for us.

Daniel Hood (11:32):

Excellent. Dan, what kind of highlighted change? What kind of changes would you highlight at WSRP?

Dan Rinehart (11:36):

Yeah, as I mentioned before, taking on a private equity partner really allowed us to help some of the seasoned partners feel comfortable with their retirement. And if you think about it, what did that do for us? Well, we had four or five partners that were really able to retire and get out the door sooner. And what that did is it freed up a lot of space. It allowed, we had senior managers and we had other younger partners that maybe felt like they were log jammed a little bit, right? There was just so many people in front of them. And so it really created, the big word here is opportunity. It created real opportunity for the people at the firm to move up to move into those positions. And one other thing I want to mention is a lot of time the seasoned partners, they have a lot of comp and it frees up comp. So a change is it allowed people more opportunity to come up and a lot of times increased comp.

Daniel Hood (12:46):

Excellent. Lee, how about that for you?

Lee M. Cohen (12:48):

As I mentioned, first of all, all of that administrative burden was taken off of me and I'm able to focus as CEO of the company vision strategy, doing what I love, bringing in new clients and consulting with them. So that's been great for us and it's really been part of our growth. In addition, there's been a heavy investment, two divisions that we wanted to expand into. So we have an outsource CFO division, an outsourced family office division. We were able to hire the right people with the capital from Ascend, and we were able to really build that out over the past year and a half. And that's been great for us. But some of the others, unleashing the opportunity for the younger people in our firm has been, I can't even begin to explain it, but for a couple of things. First of all, the ability for them to buy shares in Ascend, which I was petrified about that none of them would want to, we offered it to 13 people.

(13:55):

That's the way the program works, senior managers and above and all 13 bought and half of them asked for more and when could they buy more? So that was really a telltale sign that it was a good thing. And for us, we have the alternative practice structure. So LMC advisors could have non CPA partners. We have three superstars that were not CPAs, they were rainmakers hard workers, and now they'll become partner either at the end of this year or next year. And for them, that's just unleashed amazing opportunity and management of the firm. So it's been great.

Daniel Hood (14:36):

Very cool. How about a Schellman?

Avani Desai (14:38):

Yeah, so a few things. The best way I think I can describe it is we've truly really institutionalized ourselves. Mean we went from, even though we were over a hundred million when we did the transaction, we were really working like a small business. So a couple of things. One, data-driven. So I now, Lightyear was able to help us with putting together a data lake, identifying revenue visibility for me, understanding profitability perspectives. I mean there was a lot of, I say 90% of us, it must've been luck. We were still growing double digits, but now I say 50% luck and 50% is data-driven. The second is really helping me put together a true executive leadership team. So prior to the transaction, I was doing a lot of the recruiting, I was looking at all the contracts and so forth. Now we have a chief revenue officer, a chief growth officer, we have someone leading digital transformation and so forth.

(15:31):

So really, again, from an institutionalization perspective and some of the other tactical things have been really partner comp. I mean, the way we did partner comp was like 98% salary, 2% bonus. And the incentivizing, what we call, they're all auditors, every partner who came up from the firm, but we changed it and it was probably the hardest thing. I had told Lightyear, you have to give me 24 months before we change any partner comp. And it allowed me to get them really comfortable with that. But we did go to a 60 40 and we're now seeing more growth just because now they're incentivized to do it and digital transformation, going back and say we're going to spend money on R&D, which is what we did the first three years, and now I'm money on research, now I'm spending money on sales and marketing. So built that digital platform, that data lake a better way to do audits and assessments. So we see a higher click of productivity now really working on sales and marketing and how do we have an outbound and inbound strategy.

Daniel Hood (16:33):

Right. It's interesting to listen to. I think almost everybody here has said at some point that it's taken a lot of work off of your hands in the sense of a lot of that back office work and all across firm leadership's hands in terms of the HR functions and that sort of stuff, back office sort of things. There's a concern I think for people who have raised, when they hear about the alternative practice structure, what's that going to mean for me on a day-to-day basis? And we routinely hear from the people who set those structures up that it doesn't make any difference to the day-to-day, right? Most people in the firm don't even notice it's a contract. You sign a services agreement, nobody ever notices it. So I'm kind of curious if on a day-to-day basis, apart from the work that you're freed up from having to do the sort of back office stuff, are you seeing a day-to-day operational difference? And since you're taking d PE and Dan, I'm going to put you on the spot first for this one. Are there day-to-day changes in your operations that are different

Dan Rinehart (17:26):

For a regular client service partner? What you mentioned is certainly true. Under the alternative practice structure. We do have an advisory entity and in a test entity that does make time tracking somewhat more complex. You just have to be careful in how you're recording time. Obviously our audit folks audit and attestation folks are, we're making sure we're in compliance and charging properly clients through our audit and attestation entity and then vice versa on our advisory entity. But other than that, for a client service partner, there hasn't been a ton of change. I mean, what they're doing yesterday is still what they're doing today. They're still focused on client service. I will say one thing that's been a welcome change is when you experience the growth that we have. Again, we started at mid 20 million and now we're going to be trending 70 million. We've had to start building out a back office, right? Previously we had the partners trying to handle our internal finance and financial statements internally. Well, we've had to hire A CFO and a controller and clerks, and what has that done? Well, that's taken an administrative burden off the partners. We don't have so many partners spending Saturday in the office doing their billings and clearing out their WIP and all that. So it's been a welcome change for them in the sense that it's taken that administrative burden off of them. Right.

Daniel Hood (19:00):

Lee, how about a day-to-day operations at LMC?

Lee M. Cohen (19:04):

Day to day for staff and managers, no change operating the way they were operating client service. I think some of the biggest changes come from vision and strategy that have been implemented via our CGO and Ascend and them being part of understanding the growth, understanding what's going on in the firm. And I think just generally our CGO Chief Growth Officer is building out similar, a back office team that's handling a lot of the things that even staff and partners were handling before. And that's been great in operations and process implementation. And that CGO person in our firm, I really call her the integrator. She's integrating if anyone's read Rocket Fuel, but she's integrating my vision and my strategy and she's really being there to be a thought partner to me. I've heard through the grapevine, I've been asked many times, is she in a sense spy? And that's the furthest from the truth. She's there, she's supporting our firm, she's on our payroll, she's working hard for us, and her goal is growth and same as mine.

Daniel Hood (20:30):

But just to clarify that for Ascend, that is with all their partner firms, one of the parts of the deal is as chief growth officer gets installed executive center, they're not a spy. Maybe you just briefly talk about that role or how that comes about because I think it's a little unusual.

Lee M. Cohen (20:46):

Yeah, so they recommend that you hire a chief growth officer if you don't have an operations person or something like that, which I didn't have. And operations was something that we struggled with and every time I wanted to do something about it, I had no time. I was bringing in new business and servicing clients and covid and everything else that was going on. So they presented us with a few candidates who they thought would be a good fit. We got to pick who we wanted to hire, and I was very adamant that I only wanted someone out of industry and they convinced me, we want you to try consider someone out of industry. I said, okay. This was early on. I said, okay, I'm going to throw them a bone. But I met this woman and she's really turned around our firm from pricing to our niche clients, to churning clients, to doing all the things yesterday that they were talking about that PE wants us to do. She's been really there to support us all along the way.

Daniel Hood (21:53):

Awesome. Cool. Avi, how about at Schellman in terms of day-to-day operations? Are you seeing a big difference?

Avani Desai (21:58):

The only difference that I would say that the firm is seeing at the below leadership level is how quickly we are changing things. So just we would've had to do it. I had a town hall meeting the other day and someone's question was, we've changed more in the last three years than we did in the 18 years prior to that. And it's very true, right? We're changing pricing, we're changing our technology, we're changing compensation. We would've had to do it anyway, but probably it would've been elongated maybe a few years. Now we're changing things very quickly from a leadership level. I mean, I dream EBITDA and gross margin, I didn't think I would ever do that. But yeah, I mean metrics driven at my leadership level, we talk about productivity and that's something we didn't talk about. I mean, it was always top line growth for us, how many clients we're bringing in.

(22:48):

And now we're talking about do we fire clients because they don't give us the profitability or the gross margin? Do we have count discussions? We're very thoughtful of how we're backfilling headcounts and so forth. So for my leadership team, especially the partners who grew up in the business where they didn't have to think things about that, they would just come to me and say, my revenue grew 20%, I need 20 more people. But if your revenue is growing 20% because of price increases or administration, you don't need people. So having those conversations and really changing that mindset is probably the biggest change that they'll say that they're going through.

Dan Rinehart (23:25):

Gotcha. Excellent. Dan, let's see. I talked about just changes in day-to-day operations, and I mentioned that. I'm trying to think anything else that I can add to what I said previously about it, but again, timekeeping and all of that is a big thing on the advisory and the attest entities and the back office, as I mentioned, the back office thing was really big to have some back office support open up for us and it freed up a lot of time for partners.

Daniel Hood (24:05):

I think I called you on you twice.

Dan Rinehart (24:07):

You did,

Daniel Hood (24:07):

But that's fine. I misread, but Im supposed to turn that to Collin.

Collin Hill (24:10):

You did a brilliant job.

Daniel Hood (24:11):

Thank you for filling in nicely with that.

Collin Hill (24:13):

I would echo a lot of what Ney said. From our perspective, we focused on trying to minimize the impact to the line partners and into the staff. And there are certainly changes for the executive management team, but at the end of the day, we're still executing on our strategy. We're still running the operations. Our partner does not want to run the operations of the business. And so we, we've kind of stayed the course. I mean, certainly things have changed with the APS, but operations has stayed the course.

Daniel Hood (24:45):

Excellent. Well, I want to contrast that question right about dayday operations, what's going on in the firm every day as people come into work with sort of more of a strategic focus. And Lee, I want to go to you first with this because we were talking about it on some of our prep calls and you were talking about it had a pretty big impact on your strategic thinking. Maybe tell us a little bit about that.

Lee M. Cohen (25:06):

Sure. Before Ascend, we had no strategic planning. I had no strategy. It was top line growth, bring in any client. We had no plan of action Through a budgeting process, through a five-year strategic plan, we've really been able to look at our practice, we've looked how we're going to grow it, what type of acquisitions make sense, what type of clients make sense, heavy KPI, looking at KPIs, constantly realization, utilization, all things that I wished I could do, wish I even knew about my firm that I now know. And now we're able to make much better decisions. Hiring decisions like Nee was saying, you improve realization, you raise fees, you don't need more people to do more revenues. And understanding that and really having a full understanding of my business and my practice has been, I'm going to say mind blowing for me because it's been a major shift in the way we operated.

Daniel Hood (26:19):

That's amazing. That's awesome. How about you? How did it change your strategic planning operations process?

Avani Desai (26:26):

Very similar. We were very tactical. We were fighting fires all day, every day, especially our leadership team. So this really allowed us to kind of scale up. I said that we were doing a hundred percent of things at 60% and now we're doing 60% of things at a hundred percent. So we're finally getting things done. So every year we sit down, we have strategic areas of emphasis, so it could be growth, it could be gross margin, it could be our first values. People come first, so people, and we don't do projects that don't focus on what are strategic areas of emphasis. So it really keeps us focused and prioritized, and I think that's been the biggest thing when it comes to strategic planning. So we do a thousand day plans. It's just my marketing of way of saying three year plans. There's really, anyways, but so these thousand day plans, everybody at the firm knows everyone from our associates all the way up to our board, knows them, maybe not every single detail, but really high level of these are the six areas that we're going to focus on. And every quarter we tell them exactly where we're. So increased transparency, increased visibility, accountability was never a thing at our firm. And now with KPIs and metrics, I mean, I have a dashboard that we run through Power BI that allows everyone to see where they are and they're accountable for it. So it was really a huge culture shift from being tactical day to day to really being strategic. But I think accountability is such a key part of that, and it took us probably a year to make sure that we kept people accountable, including myself.

Daniel Hood (28:04):

Gotcha. Excellent. Collin, how about Cherry Bekaert?

Collin Hill (28:07):

So we had our strategy and what would happen is we would be in the board meetings that we were having and it would digress into operations. We just always got stuck there. In the new model, in our board meetings, it's all about strategy and the implementation of it. The comment was made yesterday about accountability, a quarterly board meeting. We're reporting back to them on the progress that we've made on seven objectives on a quarterly basis. And I just think that we've gotten much, the strategy is crisper and the accountability has made us move a lot quicker through the organization. So from our perspective, it's been great to be able to focus on the strategy in the board meetings.

Daniel Hood (28:56):

Excellent. Dan, if I ever call on you, try feel free to be like, no, just ass off.

Dan Rinehart (29:01):

But I think sometimes I can have a lot to say, so you can call on me. Yeah, it's interesting because we're a bunch of accountants right at the firm and we're supposed to be experts on accounting and financial reporting and all that. And we are, but we didn't, similar to what Lee said, which I fully agree with, and right on point with our experience, I don't know that we had had really dived into the details of realization and utilization and everything we could have. Certainly we understood it and we were tracking it and there were metrics and KPIs that we were looking to. But from a strategic planning perspective, we really had to dive into the details. And now we do that. As I mentioned, we've hired a CFO and controller that do that every month for us previously. And you can use that to make decisions, pivot, make changes more real time than we were doing before previously when we just had one of the partners or the office manager helping us with that stuff. If it didn't get done until the second or third or fourth week after the month or maybe the next month, it wasn't a big deal. We were sort of just accountable to ourselves having this extra reporting and that has actually been really, really good and help us make decisions more real time that we weren't doing before.

Daniel Hood (30:37):

I sort to pursue that. My sort next question is, I phrased it to you guys, and this is not a great way to phrase it, was sort of how much control did you give up? But really, I don't mean it that way, but mean most firms say we really didn't give up much control at all, right? The reason PE firms buy accounting firms is because they're buying firms that are successful, know what they're doing. They don't want to run accounting firm. But there is that reporting relationship in that sense of you can be held accountable. Maybe kick us off here. Talk a little bit about that in terms of how you feel about the control that they have versus what you have, but also that reporting relationship.

Avani Desai (31:08):

Yeah. Well, look, we were the first, I guess, assessment firm or a CPA firm that they ever invested in. And so it was kind of nice that they didn't really understand the industry that was, but I mean, I've never spent so many hours putting together a board deck and a compensation. I mean, it is a whole new level of reporting. I mean, our monthly reporting package, thank goodness, I have a great CFO now and she has automated it, but that level of reporting was probably the hardest thing for me at the beginning. And it wasn't how much control they had, it was how much data that they wanted. And now I understand. But it took us about a year or a year and a half to really start automating it. So once I had a, I had a data lake and that now I can do it, it happens in real time.

(31:59):

It's much more helpful, but not really much control. I mean, they're not in the day-to-day. Our firm except for the leadership team doesn't really see them. But I've also made it very clear to my leadership team that we don't talk about these changes are made by our investor. These changes are made by the board. These changes are made by management because it's the best thing for the firm to do. It's going to allow us to be a sustainable firm. It's going to allow for progress, it's going to allow for growth. But once we started saying in the beginning, we would say, well, that's what our investor wants and that's what the board wants. And that started really eroding trust for the firm. And so communication was really important. Yeah. Do they have accountability over me? A hundred percent, right? If I don't hit my numbers, yes, they're going to give me a call, but the rest of the firm doesn't see that. And they've been a really good partner to us. They're not operators. Our board meetings are really spent on brainstorming. We send them the deck before and we don't even go through the deck. It's really, Hey, I want to get into these markets. I want to get into these new strategic areas. I want to look at transformational m and a. We've never done that before, so that's been a good partnership.

Daniel Hood (33:13):

Excellent. Collin, how does it look at Cherry Bekaert?

Collin Hill (33:17):

So it never felt like we lost control. It just felt like we had a new partner at the table, which we've really appreciated, and it has played out well for us. I could echo a lot of the things that NY just said, but way we structured a lot of things when we went through our process and what we'd spent time talking to Parthenon about was how decisions were going to be made. And there were a lot of things that we felt like had to stay with the legacy Cherry Bekaert partners, and we structured it that way. And so what I mean by that, there's certain partner promotions or lateral admit partner that comes into the firm that stays within a legacy Cherry Bekaert partner committee, and they're approving an overall budget or they're approving any equity issuance, but they're not involved in that level of the operations. And so I think that's really played out well for us. I mean, we have the quarterly board meetings, we have monthly financial reporting meetings, and then for folks on the executive management team, there are other informal meetings, but that's really the extent of it. And like I've said earlier, they don't want to run the firm.

Daniel Hood (34:29):

Dan, how about for WSRP?

Dan Rinehart (34:31):

I agree with what Collin just said. Obviously from an equity perspective, control has changed, but I don't think that's really what we're talking about when we think about control. For us, we have not noticed any change in control. We still operate the firm. We still run the firm. We meet as a partner group and we make decisions, and we do look at our private equity partner as a partner. This is not someone that's a boss to us or they're just a partner with us. And I'm trying to think of one decision where we haven't felt like we couldn't make it. We're still running the firm and we're still in charge. In fact, there's sometimes I'll call our private equity partner and say, well, what do you think about this? And they say, Hey, you're in charge. You're in charge. You guys run the firm. And so that's been something that's been really welcome. One of the, I think scary things about taking on a private equity partner for many firms would be, is someone going to be walking the halls in my office and telling me when I can go to lunch and leaving a review note on my work papers? And no, that's never going to happen. That's not going to happen. Right? You still, and you still have to be able to run your firm.

Daniel Hood (35:59):

Yeah. Lee, how about you have a spy now in your, how does it looking at LMC?

Lee M. Cohen (36:09):

Control, like everyone's saying, it's a partner. They're not breathing down our backs. We're making all the decisions. We have an executive leadership team that's making those decisions. If there's anything we're ever unsure about, the Ascend board is there to be a thought partner and sort through things with us. So that's been great. We report weekly KPIs to them, and we're well ahead of it. So if something doesn't meet budget or something, we're giving the explanation so that they understand it. There's never been a time where anyone's scolded us or anything for not meeting certain KPIs. Again, no one's walking through the halls telling us what to do. We're making those decisions. We're accepting clients that we think are the right clients and everything. So that's been really good. They've taken over the monthly reporting, monthly financial reporting, so they have their own back office team that does financial reporting for us. So we get our monthly financials, KPIs, everything from the Ascend team, which has relieved a lot of pressure off of us and has not increased our own overhead. So that's been a very big plus for us.

Daniel Hood (37:38):

Cool. Throughout the conversation, it's been clear some of the resources that your PE partnership bring to you in terms of business advice and acumen, brainstorming kind of capabilities, back office help. And we have got two more questions that I want to get to, but I do want to just maybe make this question sort of a lightning round type question. Go through real quick, any other resources that your partner brought, either that you were surprised by or that you really value? But Collin, you can kick us off here.

Collin Hill (38:04):

Certainly not only the people on our board, but then we have access to their full team. So everything from marketing, sales strategy, m and a number of other folks that I think have been very impressive and actually have played a key role in, I guess learning and development for some of our management level folks. So it's been tremendous. We hired a former Parthenon employee, which to your word spy, and people thought it was a mole. That was the term that we used. I don't think that is true, but there's also vendors that they have recommended to us that we've used on large technology projects that I don't think we would've found otherwise. So I think that part's been tremendous.

Daniel Hood (38:52):

Excellent, Dan?

Dan Rinehart (38:53):

Yeah, of course. All of the standard answers that you'd think are there, right? They bring capital, they bring opportunities for growth and resources in that manner, which is just really, really awesome. Something else that's kind of an ancillary benefit that I don't know that you'd think about is private equity firms have been really involved in m and a over years and years and decades and decades. And I think that, I don't know if I use the word expert or not at integration, they know how to acquire things and integrate 'em. And we're a CPA firm. We're really good at helping our clients with their tax returns and their audits. And when you start acquiring other firms, they're really a great resource to tap into them and their board members on how have they done integration in the past and how can they help us with that?

Daniel Hood (39:55):

Excellent. Lee, how about for LMC?

Lee M. Cohen (39:58):

So again, pretty standard things that I've said already today, but two things stand out for me. The whole world of AI right now is so prevalent and Ascend has hired someone to lead the AI at all their firms. And I've spoken to him a couple of times recently and he is really knowledgeable and is really bringing a lot to the table with respect to AR, AI processes, ChatGPT bots and all of that stuff, which has been really helpful because you're hearing so much about it and you don't know even where to start. So that's been great. And then leadership and development training for our staff, even for our partners, they've done a lot of soft skills training, business development training, public speaking training. So all of those things have brought a lot to the table and really are helping us distinguish from other firms out there in New York.

Daniel Hood (41:02):

Excellent. Avi, any new resources, extra stuff they brought that you were psyched about?

Avani Desai (41:08):

Well definitely agree with that. I mean, I'll talk about two things that were interesting. One, definitely pricing methodology for us. Everything about building a deals desk, understanding, I call it surge pricing or Uber pricing depending on when our busy seasons are. And that was something new to us. And then the second thing is definitely ai. I call AI the corporate ozempic. Everyone thinks it's going to cut the fat in a day, but it's definitely not. You got to make sure that you keep muscle mass. And that's probably the one thing our investor and I think is you can't cut 25 headcount overnight because you're going to implement this genix bot that's going to start doing audits. But yeah, they've brought really great resources to the team when it comes to emerging technologies like AI.

Daniel Hood (41:55):

Awesome. We have a couple minutes left. I want to get onto these last two questions. I think they're one super interesting to me, but also valuable to the audience. And that's to start, Dan, you can kick us off here. Was anything that turned out differently than you expected? Things you were like for good or real either way when you signed up, you're like, this came and changed your idea of everything.

Dan Rinehart (42:18):

Well, of course, going into getting a private equity partner, we ask a lot of questions and I'd encourage anybody who is considering that ask a lot of questions. We started our process in August and then we ended up closing. It took seven or eight months I think, and we ended up closing in February, February 1st. And so that gave us a lot of time to really kind of flush out everything. But something that is different than I expected is they really are a partner with us. We don't at all feel like we're just a machine pumping out numbers. They really are really a partner with us, and maybe they're not sitting at the table with billable hours, but they really are a partner with us. And that's been really, it was kind of scary going into it, but that's really been something that's really been a positive for us.

Daniel Hood (43:21):

Awesome. Lee, I know you mentioned for instance, the focus on strategy and the ability to focus on strategy. Any other things that were unexpected or changed that you were surprised by?

Lee M. Cohen (43:32):

Two things. When I did the deal, the day I signed before I signed, I said, don't ever ask me to do an acquisition. I wasn't interested, I was only interested in organic growth. We've done two acquisitions so far with two more in the pipeline. So understanding that whole process and having them be a partner to that integration, which you were speaking about earlier, has been amazing. And we had several failed attempts at offshoring, and that was something else that my whole partner group, we were not really keen on from the tax side. But Ascend has a firm in India called Sentient, and that's their offshoring partner. We had a couple of partners go out to India recently and they come back and said, this is amazing. We want to roll this out across the whole firm. So those have been great surprises for us.

Daniel Hood (44:35):

Awesome.Very cool. How about at Schellman?

Avani Desai (44:38):

Probably two things I mentioned. The first one, just the increased amount of reporting I think was a shock to us, but we learned. And then the second thing was it took us a while, but I kept, sorry, anyone who's PE here, but you can't live your life in a spreadsheet is what I tell my 28-year-old boss, that's accountant's. We're a professional services firm, so getting data from there. But we've come to the realization, yes, it really helps to be able to see that. But no, we've had a great partnership with that. And for me, it's setting my expectations of things that I won't negotiate on. And a lot of it's like, hey, benefits and some of the traditions that we've had as a firm and the other areas of these are the specific metrics that we want to meet to create value. So it's been a really great partnership the last three years.

Daniel Hood (45:28):

Awesome. Excellent. Collin?

Collin Hill (45:31):

From our perspective, my perspective, it's been a great relationship. The pace as we anticipated, the pace picking up, I think the pace has been quicker than I even anticipated. And the growth has to, I knew that we were going to go down the m and a path. We've done more deals than I thought we were going to, which has been a lot to integrate, and I think we're still evolving and making progress there. And this is a little bit of a funny story. Being an auditor, I worked a lot in tech and life science, so I had done a lot of first time audits. I did not realize how hard our audit would be to get through after 75 years of Cherry Bekaert accounting. But that was an experience that I don't think we really anticipated either.

Daniel Hood (46:25):

But you made it through.

Collin Hill (46:26):

We absolutely did. Timely everything.

Daniel Hood (46:29):

Awesome. And then this last question, and we got just enough time for it, is what advice you would give other accountants? Dan, you had said, asked lots of questions. That's obviously great advice for anybody going into it, but what any other advice you would have for people looking to make a deal?

Dan Rinehart (46:44):

Yes, yes. Involve your management team and your partners early in the process, right? It's going to be a change to your firm somewhat. They're going to feel like it's a change and involve your partners and your management team early in the process so they know what's going on. They're not scared and nervous and what's going to happen. And don't have it be something that you just announced one day on a Friday night, and hey, Monday by the way, Monday morning, everything changes because it doesn't really change, but involve everybody as early as you can so that everybody can ask questions and get comfortable and everybody feels like they're part of the process.

Daniel Hood (47:33):

Gotcha. That makes sense. Lee, how about you? Any advice for people looking to do a deal?

Lee M. Cohen (47:38):

Yes, erase your limiting beliefs surrounding pe. It's a lot better than a lot of people. Make it out to be and really find a PE partner that's really in it for the long haul and not looking for that five year flip. I think for me that was really important with my deal with Ascend is that the management team is anticipating being there for the long haul. Shareholders may change, but the management team, the people we deal with day to day are people that are there and are committed to being there for a long period of time. And that I was a younger partner and that made me feel good. I didn't want to be dealing with other people down the line.

Daniel Hood (48:28):

Right. Makes sense. Collin, how about advice from Cherry Bekaert?

Collin Hill (48:34):

I just start out educate yourself as much as possible. Talk to as many people as you can, make informed decision. And then if the decision is to pursue it, run a process. I think someone said that up here yesterday. Run a process. Talk to as many potential sponsors as you can to make sure that you're finding the right partner for your firm. And then the other thing that we found incredibly helpful was our investment bankers. We found that invaluable during the process.

Daniel Hood (49:11):

Excellent.I you get to wrap it up. Final advice for everybody looking to make a deal.

Avani Desai (49:14):

I would say build the team that you want. Post-transaction. Having a strong CFO and having a strong COO, we will run a process the next time we do this. So it could be seven months, 10 months. I mean your eye's going to be off the ball, but if you have a super strong leadership team that can continue to keep day-to-day running, I think that's going to be exactly what you needed. And so I worry about keeping my eye off the ball if I'm doing meeting bankers and having conversations with other investors. So just building the team that you want that can do a lot of the due diligence and pick up. So it doesn't mean that you're having to do everything.

Daniel Hood (49:51):

Awesome. Alright, well this is perfectly on time, so I appreciate that. But I also appreciate all the insights, the advice. It's great stuff. Lee, Collin, Dan and Avi, thank you very much for sharing all that with us.