PE in Accounting: The PE State of Play

In this session, a panel of top experts and deal-makers (including our conference co-chairs) will survey the current state of play in the accounting profession — covering everything from what types of firms can expect to be able to make a PE deal and how those deals are changing, and how that is impacting the broader profession, laying a groundwork for the more granular discussions to come on Day 2.

Transcription: 
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record. 

Daniel Hood (00:08):
Gentlemen, you've all met them. I want to give you an opportunity to talk a little bit about who you work with, the firms you work with, and your approach, whether you are doing private equity or something different.

Bob Lewis (00:42):
I am Bob Lewis. We've been through this—firm transactions, helping people out in the right direction, and coaching. Let me know. Okay.
Philip J. Whitman (00:59): Phil Whitman, CEO of Whitman Advisory. Oh, I'm sorry again, it's going to take a while for me to get used to this—Whitman Advisory. That's something new today with 52 people in 16 different states. We recently launched the first and only Bitcoin fund for CPA firm high-net-worth clients. Happy to be here to talk about private equity.

Daniel Hood (01:26):
On the first day last year at the PE Summit, we ended with this panel. I said it was a great way to give a state of what's going on. It was introducing what was going on with PE for a lot of our attendees, and it also keyed up the next day. I expect to see that tomorrow as well. But I think what we're discovering is that in the past year, this landscape has changed enormously. A lot of the things we talked about last year have changed beyond all recognition—or at least pretty far. Bob, maybe I can start with you. How would you say the PE landscape has changed in the last 12 months?

Bob Lewis (02:00):
It has definitely increased in terms of more investment groups wanting to acquire firms. I'm sure my co-panelists have the same experience. In the last week alone, I think I've talked to three new groups. Probably in the last 24 hours, I've met 15 more in the hallway, all trying to figure out how to enter into this market. Many more have acquired firms. In addition, a big part of the last months has been traditional firms taking outside investment and taking capital to compete against the private equity firms. I think that's a huge part. We are also seeing a different fit coming into the market. I'm guaranteeing that these guys are getting calls from family offices and individuals from alternative investment groups trying to figure out how to break in. That's what I've seen as the biggest change.

Daniel Hood (02:51):
How about you?

Philip J. Whitman (02:52):
I think to date I've met with 230 strategic investors in this profession. We work with about 40 of you folks out there. What I've been seeing is the interest coming way down in the marketplace. A lot of PE groups and venture capital are looking at much, much smaller firms. I had a call about six weeks ago with a new strategic investor and they said to me, "Phil, we're looking for firms with between $2 million and $7 million of gross revenue." So imagine this: it's not only available for large firms but small firms as well. The smallest deal that we've done to date was a $1.8 million firm that ended up with a $2.5 million valuation. This managing partner thought one day he was just going to close the door, turn the key, shut off the lights, and be done. Instead, there's a group out there trying to build around him. So, interest is moving to smaller firms, and I do believe that what we're going to see also is continued significant competition for those smaller firms. Some of them have 30 platform firms now, and I think 2026 is going to be the year of the "tuck-in."

Daniel Hood (04:38):
Last year, people were saying they couldn't imagine a deal below $15 million or $10 million unless it was a crazy special firm. Now we're talking about the idea that by the time you graduate from college, a deal will be waiting.

Allan D. Koltin (04:53):
Allan, how have you seen the market? Yeah, I think these guys summarized it great. The playing field has changed. In the early days, it was big on big—top 30 and top 50 in the middle. Today we're in the world of the "wee" ones. I haven't heard revenue that low, but for sure revenues of $5 million to $25 million. If you have $1 million to $3 million of EBITDA, there's a whole market for that. The dirty dark secret is there are way more buyers than there are eligible firms. Oftentimes what we're now telling firms is we wish you had come to us in 2021, 2022, or 2023. It's a saturated market, so you're going to need something spectacular or different than anything we've ever seen. We're starting to see derivatives. Some say, "We're only interested in audit," or "We've got the AI," or "We only want tax and high-net-worth." We're starting to see specialized interest looking at everything out there.

Bob Lewis (05:54):
The concept continues to evolve. I think I got that same call, by the way, about the investment group wanting to roll with small firms. I don't know how small we're going to continue to go, but everybody's jumping in.

Daniel Hood (06:10):
We got a question on this topic. Do their expectations vary when they're investing in smaller firms versus larger firms? Do they go in and pay less, for instance, or expect more control? Are there differences in how they look at smaller firms versus larger firms?

Philip J. Whitman (06:34):
It's interesting. Before private equity came in, a $5 million firm was valued at one times gross revenue—it was a $5 million firm. We didn't look at profitability or EBITDA. We said, "Okay, you get 20% equity if I do the math right, and we're going to come together." I think what we're seeing right now with these larger private equity groups is a lot greater accountability. It's not as even, but the partners aren't as concerned.

(07:43):
I think with these "constellation" models, for most partners it's business as usual. The leaders in the firm have a brilliant person sitting next to them in the boardroom helping them decide the direction they ought to be going.

Daniel Hood (08:05):
If you guys wanted to weigh in on that.

Allan D. Koltin (08:09):
You know, there are three levels of private equity. Level one is: "I have money and I want to get a return." There's not a deep thesis, but they read a journal article that accounting firms are the next place to go. Level two is a bit more sophisticated; they have a thesis, something differentiates them, and they know precisely what they want. It could be industry-focused or service-line focused. Then there's a third level, which we lovingly call "best in class." They specialize in people businesses and they're not just a purveyor of capital; they're truly a strategic partner.

(08:46):
They will help make us better and get us to a place of growth that we've never been to as a firm before. So we're seeing different levels of sophistication coming into the market.

Bob Lewis (08:57):
To go back to the initial question on the smaller firms: are they getting different expectations? I think our reality so far has been they are buying the equity, but it's pretty much an acquisition. With smaller firms, the control is still there because "I'm the owner, I'm going to let you continue to run it," and then hopefully get replacement talent from some of the staff. I think that model is going to continue to expand because if you look at the base of the pyramid—going back to the top 45,000 firms—firms under a million dollars are difficult to make work because they're not priced properly. But the landscape is moving.

Daniel Hood (09:53):
A lot of them are changing. Do we expect to see similar levels of change in the next year? It's not static. It hasn't reached a point where this is what it's going to be for the next year or two. Do we expect to see similar levels and amounts of change?

Bob Lewis (10:13):
It's continuing to evolve. I thought it would eventually stop snowballing, but there are more and more firms reaching out. I think you both are experiencing the same thing.

Allan D. Koltin (10:24):
You know the old adage: every action has a reaction. We're doing a lot of work with independent firms, and they're bringing us in saying, "Our valuation is nowhere close to market." We can look the other way on that—maybe it doesn't matter, or maybe it does matter. That's one thing. I don't want to say private equity exploited it, but let's talk reality pre-2020. Phil was talking about this. You sell your firm to a larger firm, you come home and you say to your spouse or significant other, "It's a champagne day. We did the deal today, we sold the business."

(11:07):
And your spouse says, "Oh my god, let's open champagne! How much did we get?" Well, we actually got nothing, and we have to wait 20 years for the first dollar, and we had to write a check to them to establish a capital account. "Don't open the champagne, we can't afford it." That's what we all inherited. Private equity comes in with something that just shatters that. So the firms that remain independent have to deal with the question: "Do we revalue our own firm because the market has set a whole new price on it?"

Bob Lewis (11:40):
And to his point on revaluing our own: the question is, if we do revalue internally, is it a sustainable valuation that could actually be acquired by the people buying in internally? I think that's the biggest rub right now. If they can't afford the market values that private equity is offering—even if I did a compromise between one times value and 1.5, and made it 1.25—the buyers still can't afford that.

Allan D. Koltin (12:06):
And you guys have talked about the evaporation effect. Compliance revenue with future AI could actually go the other way. That would be the big question.

Daniel Hood (12:23):
I want to talk to you a little bit about this next question. You walked us through the structure of an average deal this morning. Are deals changing? Is the structure changing? Are multiples or levels of control changing? What do you see happening next?

Philip J. Whitman (12:47):
Absolutely, increased multiples. At first, when this started and we were seeing private equity groups coming in and buying up firms—whether they were add-ons—a multiple that was a four, five, or six has increased. What used to be a four is now a six. What used to be a six is an eight or a nine. So, definitely increased multiples. I think also significantly more selectivity. I think there was a race for firms just to get their first platform.

(13:21):
Once you get your first one, it's like a domino; the chips start to fall because you've established that you've done it. The first thing someone's going to ask you if you're the new kid in town, even if you have a great model, is, "Have you done this before? Have you done this with anyone else?" So I think we're seeing a lot more selectivity. And the third thing I would say is that we're looking at a population of 45,000 CPA firms. Probably 700 to 1,000 firms have participated in some sort of private equity or other strategic deal. While 300 to 500 have been picked through, there are a lot of firms that don't give out their information—$20 million firms, $50 million firms—they are needles in a haystack. But I think there's still a long way to go, especially now that we're seeing firms out there saying, "You've got $500,000 of revenue and you're putting 50 points to the bottom line; we'll do a transaction with you." It might be a tuck-in, but we're definitely seeing new models on that smaller scale.

Allan D. Koltin (15:06):
The competitiveness on the deals that we're seeing is high. In any year, you could have 15 target acquirers sitting at the table, and multiples have probably moved half a point to a point every year. We try not to sound like used car salespeople, but when we get asked the question, "Where are multiples at?" we just kept repeating for three or four straight years: they're at the highest level they ever have been. And we're not making it up; it's really what's happening. There's a new term out there that I coined called "artificial EBITDA." How does someone win a deal? Either you're going to out-multiple somebody or you're going to create EBITDA that doesn't actually exist. This is really hard because you have to convince the underwriter to make it happen. But now we see things like "synergistic savings" where the acquirer says they are going to give half of that back to the acquired firm.

(16:05):
They'll say, "You're going to eliminate all your technology costs." You really aren't, because you're going to have to pay directly or indirectly for the bigger firm's technology. But we're seeing creative ways to get to a number that never existed before.

Bob Lewis (16:19):
Think about when you talk about your billable hours. That's almost an example of what he's talking about—artificial EBITDA. It's not real, but it could be. How do you position that? What we've seen, though, with big deals is basic supply and demand. Right now, supply is shrinking and demand is rising, so prices go up. Not everybody reports their numbers. We've got one person on our staff whose job is to find firms nobody knows about. She comes up with anywhere from 20 to 40 new firms a week—some of them $20 million firms.

(17:24):
It's true. Have you seen any deals where the multiples are going down? Unless it's a disaster, they're all going up. So the question is: what's the limit on pricing? I guess none of us can really answer that. I also want to talk about what's impacting younger professionals. It's not just about the numbers; it has to make them feel good too.

Daniel Hood (18:10):
Regarding the "three levels"—from "I've got money and I want a return" to high levels of complexity—I want to take an angle on that: how well do we think PE understands accounting? There are going to be levels; some will and some won't. But do you have a general sense of how well they understand accounting and what's unique about it?

Allan D. Koltin (18:41):
I think they have a pretty good understanding, but they come in all sizes. There are some that would like to be hands-on; they want to be something more than a purveyor of cash. They want to be your strategic partner. Then there are some where that's not their thing. What they'll say is, "We're going to leave you alone. You're running your business. You were successful before we met you. Call us when you have a strategic or capital issue." They have a day job, so they want to find great leaders and empower them to go do their thing. So, yeah, it's all different types, to be honest with you.

Daniel Hood (19:20):
Bob, you talk to these people on a regular basis.

Bob Lewis (19:26):
I'm surprised at how many private equity people can do math. Seriously, they make investments to make money; that is what they do. I don't think they even need to understand accounting as much as they understand management. They're really good at managing businesses. I see that as a huge gap in a lot of firms. We've got comfortable firms running along nicely, but PE comes in and shows you how to manage the business better. Do they know every tax or accounting rule? I'm not sure they need to. That's why they buy us. It's about the people in the firm. I see them bringing discipline to these firms to make the cash flow come true.

Allan D. Koltin (20:24):
In real estate, you buy a fixer-upper. I think we've seen in the last two years firms that we didn't think were worthy—or maybe a better way to say it is they weren't best in class, they were average—and you see PE lining up to acquire those. They call the three of us to say, "What do you think?" and we say, "Well, we think it's not going to be a good investment." Then you find out they still want to do it, and I'm like, "What's up with that?" What's up with that is: it can only go up, right? So I'm now seeing what I'll call the "C player." If you can take a C or C-plus and over three to five years move it to a B, you're going to get a return on your money.

(21:11):
The only slight flaw in that is it's not real estate—it's brains, it's people. Thinking that's an easy thing to change—an average performer to a high performer—is not so easy. So I think eventually what's going to happen is, right now they're all hitting it out of the park, but we're going to have some average ones that are definitely going to show up.

Daniel Hood (21:38):
Phil, I want to get your thoughts on the 230 investors you've spoken to. That number probably changed in the last five minutes.

(21:49):
Talk about their level of understanding of the profession.

Philip J. Whitman (21:56):
I am going to give a shout-out to those in this room today. They came into a profession where, unless you've been in the trenches, you don't really know the inner workings of a CPA firm—everything from HR, finance, and marketing to business development. There are firms that are A-plus firms and there are firms that are B firms. I think they've done a wonderful job of studying our profession. I'll go back to David from Ascend. In two and a half years, he has built a platform that'll probably close this year with $600 million in annual revenue. I don't know if anyone in our profession has ever built a $600 million firm that fast. Nevertheless, they amassed $600 million in revenue. I remember when David first came to town and he called me up; I spent a lot of time with him doing a lot of education about what it's like to run a CPA firm.

(23:19):
I had been the COO of a then-top 30 firm. We spent a lot of time together. I also met with others—I'll give a shout-out to someone I think you'll meet tomorrow in a session. He's a brilliant finance guy who I think knows more about audit than most of the auditors in this room. He studied it and he's built technology around it. So, while if you asked me this last year I would've said they have a lot to learn, they've actually learned quite a bit. They're doing their homework and their due diligence to understand our business.

Allan D. Koltin (24:10):
Dan, this is going to be a telling year because we're probably going to have what we call "mothership" firms exit, and we're going to see three roll-ups that are also going to explore exiting, and we're going to see what the multiples for all of those are.

(24:29):
We'll be sitting here a year from today with an entire industry now established. All we really have at the moment is what Citrin Cooperman did. That was a 10.5 or 11 multiple on October 1st with about $45 million of EBITDA. Forty-five million times 11 is $500 million. Three and a half years later, that $45 million of EBITDA is now $135 million, and that 11 multiple is trading at 15.75. That comes out to north of $2 billion. So, the message to accountants is: maybe we should have gone into private equity right now. Granted, there are a lot of costs because you're spending money to acquire firms and bring them in. But what will be fascinating is where these next wave of multiples land.

Bob Lewis (25:22):
Can I ask a question that's not on the sheet? Sure. Everybody in the room asks us: "What's the endgame? Where's this all going to go?" What are your thoughts? Where's it going to go?

Allan D. Koltin (25:49):
I'll give three natural outlets, but every day we're learning something we didn't see before. One of the outlets is all of them combining with each other. We've seen some of that. The second is private equity claims it's the gift that keeps giving; every three to five years they flip, and there's some buyer coming in that sees an angle. They say, "Hey, you know what? If we can offshore 25% of those billable hours, that's all we have to do." They come in with a thesis and we'll continue to see that. Blackstone's thesis was an easy one: "Hey Cooperman, we own more privately held businesses and real estate than anybody in the world, and we'll send out an email and say we've got a preferred provider called Citrin Cooperman."

(26:37):
They may be able to walk that from $500 million to $2 billion. That's a unique angle on what we're going to do better or differently.

Daniel Hood (26:47):
Phil, do you want to jump in on your thoughts?

Philip J. Whitman (26:49):
Yeah, so I have always thought that a good exit for one or more of these platforms might be a pension fund. When you look at the returns that private equity is getting, a pension fund could be a permanent holder. If they could get easily 6, 7, or 8 percent as a return to their participants, they would probably be thrilled with that. That would leave money for partners to be very happy and continue doing their work. Obviously, as we know, we talked about Andersen Tax, and we have CBIZ out there right now as a publicly traded company. I do believe a public exit is very viable.

Bob Lewis (27:39):
I agree with that. I give this a lot of thought because right now we've got aggregators building up larger firms. If I built a $200 million firm and I look at a New Mountain or Blackstone, what are they going to do with it when they acquire it? To the point about the flip: why would they have an interest in paying a higher premium? One, it's a technology play; two, I think it's massive wealth management; and three, I think they cross-sell all the advisory services firms couldn't do on their own. Look at the consumer base of what they're acquiring. They get 20 firms with a thousand business clients each. That's an awful lot of clients to market a lot of services to outside of what they currently have. That's where I think it's going to go. A business is going to go to one place and get everything they need in one spot.

Daniel Hood (28:49):
I think you successfully answered one of our questions. Someone was asking whether we've seen any firms sell to another PE firm.

Allan D. Koltin (29:04):
But Dan, I think we need to go broader than just the accounting firm. The future of the accounting profession is already out there: wealth management, insurance brokerage, and other consulting advisory firms. Some of these have been flipped three, four, five, or six times. So when people ask about the endgame, there's always an opportunity. What's the endgame of an independent firm? Who knows? We bet everything on our ability to continue to grow, make money, partner alignment, and success. I think we'll be sitting here 10 or 20 years from now and it'll still be going. It doesn't go away. The Big Four aren't doing private equity yet.

Philip J. Whitman (30:00):
As the platforms mature, one of the challenges we'll see is whether there is a large enough group out there to continue this private equity. Is there someone that's going to look at a firm that's doing $3 billion or $4 billion? I'm not sure.

Allan D. Koltin (30:28):
The one thing the three of us know is there's not one buyer for it. Just like in the NFL, you have firms that are "motherships"—you join the family, you run the play, and you adapt everything. Then you have the roll-ups where there's a level of autonomy and you can sort of do your own thing. So far we have not seen a mothership interested in acquiring a roll-up, and we haven't seen a roll-up interested in selling to a mothership. I think those channels will continue to remain independent.

Daniel Hood (31:19):
I just want to make sure we covered the potential exit strategies. So far, there's only been one flip. We talked about selling to another PE firm, selling to a sovereign wealth fund, pension funds, or potentially to a wealth management firm. Are there any other exit options we haven't touched on? Is there a chance firms might buy themselves back, sort of the way RSM bought itself back?

Bob Lewis (31:58):
That's what I was thinking.

Allan D. Koltin (32:01):
We're starting to get more calls from international players. The challenge they have is the capacity issue and the depth of service issues. Their tax code in Europe is different than the US. What they want is 200 more tax people. US firms don't really seem to have an interest in being global yet. They have a global office somewhere, but it's too early to go across the ocean when there are all these opportunities here.

Philip J. Whitman (32:43):
That's a wonderful point. I want to go back for a second. I think that there's a lot of fear in our profession. When we talk about multiples, many firm owners think, "Oh man, I don't know who's going to own me in five years. I'm not doing this." I would say for most partners, it's business as usual—you're going to go out and service the clients and it's really not going to matter. There are firms out there where they'll have continuation vehicles, and when a PE firm exits to a new management team, it will continue along. But others fear new players sitting at the table.

Allan D. Koltin (33:47):
The biggest misconception for a line partner evaluating an accounting firm is they think they're going to get weekly calls from 23-year-old Ivy League MBAs looking at their billable hours. We say, "You'll never hear from them." As a matter of fact, oftentimes when we do deals, they don't even meet the private equity people. It's sort of a rite of passage at the very end; if we'd like to do a Zoom call with them, we're fine to do it, but we're the ones running the business—they're our strategic and capital partners. That's a misconception. The other thing that has been fascinating is the mindset of partners. They've gone from measuring success based on compensation—"I was making $400,000 last year, I'm making $550,000 this year, so I think I'm doing well"—to looking at the value of their rollover equity. They're making maybe 70% of what they were making before because they sold that 30%, but their stock can appreciate in real-time. That has been an "aha" moment.

Bob Lewis (35:21):
One thing on outside investment: I think another trend is going to be minority investment. Right now, most people want a minimum of $25 million. As the market plays out more, we might see smaller minority investments.

Philip J. Whitman (36:01):
That deal I did...

Bob Lewis (36:03):
I don't know.

Daniel Hood (36:03):
Fight that out later. I want to pursue that a little bit because we've talked about second-generation acquirers. Let's talk about first-generation acquirers of accounting firms. For a long time, we've talked about PE or other accounting firms, but in just the last couple of months, we've seen wealth management practices making acquisitions, venture capitalists, and family office money coming in fairly significantly just in the last quarter. Bob, PE obviously isn't the only game in town anymore. How important is the expansion of the number of options firms have?

Bob Lewis (36:55):
It is critical. If they only have one set of options to look at, you're only going to have a certain outcome. So they've got other options to consider. As an example, a high-risk tax firm with no wealth might get a better transaction from an aggregator than they would into a financially-focused PE firm. I think more competition and different kinds of competition are going to confuse people more. The biggest problem we have when working with a client is they don't understand their options.

Daniel Hood (37:52):
What do you think about the expansion of the range of options? Do we expect that to continue? What's the impact on the market?

Philip J. Whitman (38:08):
I think it'll absolutely continue. We're working with several family office tax firms, which typically are long-term holders. Then the question we get is, "If it's a 10 to 20-year hold, there's no second bite at the apple." I'm a 67-year-old; how do I get my rollover equity? They will value the firm at the point of retirement based on some predetermined multiple. I think we are going to see other players coming into the market—new and different models—and I think it's great for the CPA firms out there. But many firms will take a phone call from a private equity guy and get all excited about it.

(39:26):
There are so many options that it's a mistake for firms to not explore the market. The added competition is great for firms. As Bob said, sometimes I feel bad—how much inventory of sellers do you have available, and can you satisfy every client? There's literally a feeding frenzy going on. As these new players come in with different models, we might find something that works better. Sometimes a PE group or a family office will come to us and we'll say, "In order for us to work with you, we've got to tweak it a little bit." Maybe there's a way to build in a second bite, or maybe you weren't going to pay partner distributions, but now we can.

(40:33):
Maybe we're going to not have dilution—we're going to provide all the funds for acquisition and your 40% is going to stay safe. There is tremendous flexibility. It's not a single mold. I think that's what these new first-generation investors are providing.

Allan D. Koltin (41:01):
As advisors, we're running a mile a minute. We believe there are five steps to getting to a finish line. The first step is exploration. If you don't have strong leadership, that's hard. It's bringing it to the partners and explaining the good, bad, and ugly of combining forces with private equity.

(41:33):
Oftentimes the leader will say, "We don't know what we don't know. Let's at least go out and find out." Level one is exploration. Level two is "marrying for money." What kind of check are we talking about? If I'm not happy, I want to make enough now that I can leave. There has to be economic proof that the number makes sense. The third one is putting away "marrying for money" and instead "marrying for love." Culturally, are they like us? Strategically, are we really better together? Can we achieve things faster together than individually? If you're still standing, the fourth level is the worst: it's called "allocation hell." There is nothing in the partnership agreement that ever envisioned a partial sale.

(42:36):
It's a spreadsheet with 16 columns and it's the Wild West. One partner says, "This is great, we're getting a hundred million dollars, there are 14 of us, we all own the same stock, so everybody gets the same thing." To which the high performers say, "Are you out of your mind? We're not allocating it that way. We're going to do it by compensation because comp is a function of who's making a difference." Then the older partner steps in and says, "Whoa, I've been here for 25 years. You've been here one year. You've done nothing to impact enterprise value. I want this based on seniority." Your head starts to spin. Then a fourth person says, "You're all wrong. It's about who created the EBITDA."

(43:29):
And the spreadsheet just keeps going like this. That's where leadership has to step in. And if you're still standing after that, the fifth level is the legal part—the "papering" and the purchase agreement. When we do due diligence, the abundance of stuff is massive. I always tell our clients when they get past level four, "Just giving you a heads-up: this is going to be a lot of work."

Daniel Hood (44:22):
In our last couple of minutes, I have some more questions from the audience. Do we think we're going to see more private equity firms doing what New Mountain does—investing in one firm and then an investment in another firm, not aiming to combine them, but investing in them separately?

Philip J. Whitman (44:51):
I think what we're going to see after a private equity group exits is they're going to come back in. I'm working with one right now that I know is going to be doing two separate platforms utilizing two separate firms and keeping them separate. I think we're going to see a cycle: "I buy a firm, I build it, I flip it, I get back in, I buy another firm," because they love this business. When you compare public accounting to being a veterinarian or some of these other professions, as Bob said, the additional services you can offer by building a multidisciplinary firm are great. I do think we'll see people entering and exiting.

Daniel Hood (46:07):
This is an interesting one. Are we seeing any PE firms attempting to differentiate themselves by culture? When they go to an accounting firm, do they say, "Hey, our culture is X"? Is that a focus?

Bob Lewis (46:27):
I think all of them basically say, "Look, we're not going to disrupt your culture." They might have a completely disruptive culture to start with, but they say, "No, we're not going to change anything in your culture." I do believe there are going to be some guidelines put in place, but why would I want to change what you've already built and what is working? I want to make it better, not change the culture. I'm not going to come in and make work hours 100 a week. That's not going to happen because they can't get an employee to stay in that situation.

Daniel Hood (47:10):
Allan?

Allan D. Koltin (47:12):
I would talk about how PE firms are different from each other. Most accounting firms, when they merge, try to hide their private equity partners in the closet. They want to make it crystal clear that the accountants run the shop. The only one that really does it differently is New Mountain. When they go on a call to pitch a firm for the first time, they're all on it together. I pulled them aside after a call and said, "Hey, I know you're new at this, but are you sure you want to do this? No one else does." And they looked at me strange and said, "But we're partners. Why would we hide each other? We're in this together." For them, that strategy has worked effectively. The firm doesn't hang up and think they're going to be micromanaged; they just think they're business partners.

Daniel Hood (48:44):
Final quick thought on what advice you have for firms in general.

Bob Lewis (49:02):
You have to look at this. Final piece of advice: if you're looking at going to private equity, look at the different options and layers that are out there. Look at whether you have a premium location or if you're going into a group that doesn't have a location. Look at the culture. They're going to say they have a good culture, but you have to check.

Philip J. Whitman (49:37):
I think if you're open-minded, you owe it to yourself and your partners to go on a journey. And on that journey, you most certainly need an advisor. There are 31 flavors out there. Don't try and do it yourself.

Allan D. Koltin (50:10):
One thing I would leave you with: it's November 19th, 2025. We're going to blink and it's going to be November 19th, 2030, and we'll no longer be preparing financial statements or tax returns the same way. Lead off your next board meeting or strategic planning session with that. Say: what are the things we need to be doing today?