The Private Equity Perspective

What does PE want? Leaders from the private equity side of the equation share why they're interested in accounting, what they're looking for in accounting firms, and how they see the relationship developing in the future.

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. 

Seth Fineberg (00:15):
Intro.

Reyes Florez (00:15):
Yeah, so Ray Flores, CEO of Platform Accounting Group. We're effectively a collective of what I would call boutique firms. Got our start all the way back, which seems like ages ago now, but 2017 with our first acquisition of private capital. And I think our general view is that there are deep challenges that boutique firms face, and we've really built a platform to help advance—what I would say evolve—the industry into its next phase.

Seth Fineberg (01:00):
Cool. Jake, you up?

Jake Nice (01:03):
I'm Jake Nice, one of the co-founders of Lane. We're a private holding company based here in Chicago and Miami. We're a unique hybrid where we're a permanent capital vehicle. Ultimately, we don't have a fund life cycle. We're structured as a private company, and our goal is to build long-term national category leaders from the businesses we're in. Archer Lewis is a business we started 24 months ago. Since then, we've acquired 40 firms across the country.

Seth Fineberg (01:31):
In 24 months?

Jake Nice (01:33):
In 24 months. At scale. Generally, we're focused on small and medium business owners and addressing their needs. We're at about a thousand clients today across the country and continue to grow.

Forrest Wilkinson (01:54):
Hi everyone, Forrest Wilkinson, I'm a Principal at Apax Partners. I'm based in the New York office. Apax is a private equity firm with a 12-billion-dollar vehicle, and we've made two investments in this space. One here in the US, which we just closed in March, and one in London.

Seth Fineberg (02:21):
We got a lot of questions you guys, and we'll also try to get to some of yours. I'm just going to go down the line: describe your model working with firms and why you adopted it.

Reyes Florez (02:47):
One of our core values is this idea of evolution, not revolution. I think that there are so many great things about accounting services and the value those services provide to clients. Our business is about 70% commercial, 30% individuals. I've always looked at the CPA function as being at the most critical moments for SMBs—business starts, financing, difficult restructuring, or even closing the doors. That CPA is typically on speed dial at inflection points.

(03:35):
I grew up inside a boutique firm—that was my family's firm—so we really are a native firm that has evolved. For us, it's really about adding core value to that end client. When you think about the challenges the industry is facing around staffing capacity, technology adoption, and then thinking about what is next with the advent of AI and agentic tools, that's where a platform like ours becomes really critical.

Seth Fineberg (04:19):
Obviously, we're going down the line for this one. Jake, describe your model.

Jake Nice (04:24):
We focused on the small business and what these folks need, which are typically accounting and tax services, payroll benefits, and IT services. It's more and more evident that this was a place where we could bring a lot of value. Especially as you think about the industry in transition: what are succession plans? What is the home for staff? How do you ultimately bring a national presence with a local delivery model at scale?

(05:22):
We're starting to see really fantastic crossover between offices where a capability they may have had to refer out before, now they can deliver on. The clients are seeing that on a daily basis. As Ray mentioned, it's a highly critical function where we're doing business returns, personal returns, and advising on other matters. We have a holistic picture as a trusted advisor. Sitting in that seat, the more we can do to scale our service offering, the more value it brings.

Seth Fineberg (06:01):
What's the secret sauce? How do you guys work?

Forrest Wilkinson (06:09):
Any people services investment is ultimately a partnership, and it doesn't happen overnight. We developed a relationship with that team over the course of two years, talking about the playbook and what we actually want to do as partners.

(06:28):
Then we become the partner and it becomes a conversation. We don't run businesses; we provide capital and an industrial lens. One of the ironies is that the bigger your firm gets from an institutional capital standpoint, the more information we have. We challenge folks to think a little bit longer term—looking at areas where we can spend money that might have a negative return today but are a better investment for the future.

Seth Fineberg (07:53):
That's what the question was really trying to get to.

Reyes Florez (07:56):
Yeah, for sure. For us, it's about partnering with boutique firms—anywhere from 3 million to 25 million in revenue. From the very beginning, we try to really honor the legacy of autonomy and independence. Again, I grew up inside a firm that was community-driven. These are relationships I saw play out over two or three generations. So how do you honor that legacy and independence while bringing in value-add initiatives? We've been able to strike that balance of giving scale and enterprise capability where it matters without being disruptive to the local brand.

Jake Nice (09:16):
I guess I'm a unique party up here because I'm on both the capital allocation side as well as the operating side. We have a permanent capital base and we're looking to invest in businesses for the next 10 to 15-plus years. I think the twofold element there is: one, a horizon to think about what it means to be a business owner in this space, and two, empowering our principals to do what they do best—which is client service—while we step back and provide the tools they may not have had access to otherwise.

Forrest Wilkinson (10:42):
The piece I would say is different is that our first 12 months needs to be two to four deals, which in this space is a slow pace of M&A. We're focused on adding value through organic growth. We're making a lot of investments in technology and lateral hiring, and then doing fewer but larger deals that complement the business strategically. If you looked at our investment thesis, the value creation comes from growing organically rather than just doing 15 deals a year.

Seth Fineberg (11:30):
Thank you. So, I know this next question is on a lot of people's minds here, regarding private equity coming into this.

Jake Nice (11:46):
The criticality of the service is key. I think it's a pretty common theme that most firms are challenged not by growth, but by capacity issues. We have a substantial focus on recruitment and developing our junior talent. Ultimately, the businesses are very high quality and the service is mission-critical. I think as we look at opportunities for us to help, it becomes apparent that we have a lot of ways to invest.

(12:48):
Firms that we're partnering with haven't had that before.

Forrest Wilkinson (12:54):
We were one of the earliest investors in insurance brokerage. We took it international. Firms that are owned by private equity often grow two and a half times faster than the ones that haven't because there's a real advantage to scale and speed. We've seen this pattern play out in other professional services categories, like engineering services and the wealth industry, where you have a business with recurring revenue that benefits from investment.

Seth Fineberg (14:24):
Great. An interesting model from what you described. Why? Tell me.

Reyes Florez (14:30):
For me, it's a passion place. I quite literally spent my childhood and early career inside one of these firms. We actually went to market with my dad's firm and could not find what we thought was the right buyer. There were aspects of the deals he didn't like—how they were treating him, what the transition plan was, or how they thought about cost savings and reduction of staff. It was just like, "there has to be a better way." For me, this was about how you protect and preserve what firms provide to clientele while facing these industry challenges.

Seth Fineberg (15:42):
What do you think are the biggest misconceptions about your teams?

Forrest Wilkinson (15:55):
I think number one is that private equity is monolithic in the way we think about the playbook. You've seen a wealth of different strategies. Some are focused on organic growth, which is very different than a lot of other international acquisitions. Accepting money from private equity doesn't mean you have to fit into one exact molding. The other misconception is that there's just a set timeline and everyone is looking to harvest in four or five years. We owned one insurance brokerage platform for 10 years.

(16:52):
When you have a winner, every year is an ability to scale. Even if a partner is only with you for five years, when it comes time to exit, the next buyer is going to be thinking about that long horizon as well.

Seth Fineberg (17:25):
You into that too. Misconception.

Reyes Florez (17:30):
Again, we're a little bit new because I think about ourselves as an industry operator. When I think about private equity, I think about it as one pillar of the business strategy—private equity's role is to provide capital and strategic insight at a macro level, then let operators and entrepreneurs run the business. I'm focused on building a great business; I just happen to have a private capital partner.

Jake Nice (18:45):
I think there's always an alignment question: how do we best align sellers, those who stick around, and those who need to transition out? There are many ways of doing that. Empowering our principles to achieve an outcome that is aligned with the company is critical. It probably doesn't get discussed enough—how to do that well.

Reyes Florez (19:45):
I would just double down on that. It's not always just a buyout or an exit. I think oftentimes people think, "Okay, this is the takeover." We've already been doing this for 10 years. It's not about selling out as much as it is about acceleration.

Seth Fineberg (20:47):
To the reality of working with you—what is it like?

Reyes Florez (21:04):
Specifically to our model: what does it look like post-close? We'll come in and run a facilitation process. We have a team of operations integration analysts and managers who go a level deeper and assess the situation.

(21:36):
Again, back to "evolution, not revolution." The answer for what the firm needs in its next chapter usually already exists in the minds of the existing team. We build an 18 to 24-month roadmap in deep partnership. We've found six or seven core areas that all firms face challenges in. We provide the execution muscle to actually go and accomplish those goals because we're not subject to the same daily client deadlines that the team members are.

Seth Fineberg (22:48):
I'm a firm owner. Curious about Lane, what is it like to work with you?

Jake Nice (22:58):
In many ways similar to what was just said. I would focus on communication and relationship building. I spend a lot of my time on the road—this last month visiting 45 offices across the country to see people in person.

(24:04):
Communication is important to effectively define success post-close. We pride ourselves on being a steady partner. It's probably the first time in a long time these owners have had an outside partner where they can build that trust. If we get a real problem, we're always here to help figure out what needs to be done.

Seth Fineberg (25:01):
Thank you. Maybe dig in and talk about what a firm can expect in the first 12 months.

Forrest Wilkinson (25:26):
There's the quarterly board meeting, which is the least interesting part. But the partnership element is the more interesting piece. When you join our portfolio, you gain access to our network. We had an event where we brought together executives from all our portfolio companies. It's the easiest selling environment imagineable because our executives would rather buy tax or valuation services from another portfolio company where they already have a relationship.

(26:40):
In addition to that, we have an operating team with functional experts—folks who focus singularly on Salesforce implementation or AI and data. They can call someone to vet vendors and help amplify that strategy. I'm talking with the executives of the company almost every day.

Seth Fineberg (27:51):
How would you say the approach to deals has changed over the past few years?

Jake Nice (28:19):
Deals are happening larger than before. There's interest in a very large market. We focus on firms between 1 and 10 million, providing different solutions for what a firm may be looking to achieve. I think people understand the space better now, which skips the part where someone shows up and you have to explain your whole business to them.

Seth Fineberg (30:04):
Forrest, how have you seen it?

Forrest Wilkinson (30:08):
I think we're in the process of changing. In the early stages, you see rapid consolidation to reach the scale required for technology investments. We're spending millions of dollars on AI. The second phase is: now that we own this, what's the strategy? M&A starts to move the needle less as you get larger, and it becomes more about organic growth. The firms that grow organically faster will trade at a much higher valuation.

Seth Fineberg (31:23):
Ray, how have you seen this change?

Reyes Florez (31:30):
I would double down on that. In the early days, it was about repaying industry debt around talent development and modern technology. Many of the firms we bought were literally using paper and pen tracking sheets. So, the first step is getting to a practice management baseline.

(32:51):
We're still in this transitional phase. Once you bring a firm to the modern age, then you think about what is next: AI tools, more in-depth outsourcing, and expansion of service offerings. When you marry the deep trust a CPA has with structured data, the next version of a CPA is really compelling.

Seth Fineberg (33:40):
How do we expect the industry's approach to the market will change?

Forrest Wilkinson (34:03):
What works in a private setting for a billion-dollar firm is different than what works for a company like Accenture. You'll see an evolution in the way people are compensated and equity-based models. People will transition focus from consolidation to differentiation—in industry expertise and technology.

Jake Nice (35:36):
Folks have come in and done the initial work to prove value. Now, the frontier is platform growth and evolution.

Reyes Florez (36:15):
I think there will be a heavy focus on operational excellence, organic growth, and service line expansion to differentiate.

Forrest Wilkinson (36:34):
In five years, this service will be delivered in a totally different way. That will cause a bifurcation between those on the cutting edge of technology and those who are not. Getting that right has to be number one on the list.

Seth Fineberg (37:26):
Thank you so much. What do you think are the most important questions firms should be asking private equity?

Reyes Florez (37:52):
Key in on: tell me exactly what happens post-close. What functions are central vs. local? How are decisions made on compensation and pricing? Where does the firm draw the line on standard operating procedures? I would also want to know the philosophy of the capital providers—what is their time horizon? You want to know who the CEO is and who the capital partners are. We value transparency; we're going to be truthful about the challenges.

Seth Fineberg (39:33):
Forrest, what should they be asking?

Forrest Wilkinson (39:39):
I would ask two things. Number one: look at the investment base. If you're developing a playbook that the team doesn't want to execute, that's a bad day for everyone. You want to make sure you're partnering with someone who has the same vision for your company. Second, I would ask: what resources do you bring to bear on technology?

Jake Nice (41:35):
The best opportunity before a transaction is to find out from those who have already transacted what it's been like. We'll share references. They'll be the best critics and advocates of what's gone well and what hasn't.

Forrest Wilkinson (42:21):
I would ask: how does the leadership team interact in the boardroom? It's easy when everyone's making money; it's more difficult when the market moves against you.

Seth Fineberg (42:43):
How do you think about an exit in terms of timing and multiples?

Jake Nice (42:59):
We tell people we're never going to sell, which is a unique one. Ultimately, we have investors with expectations, but we're focused on long-term cash generation. Over time, we could take a public model where we spin companies out once they get to a certain scale.

Seth Fineberg (44:34):
Ray, how does that look for you?

Reyes Florez (44:46):
Premium businesses get premium multiples in almost any market. We're not trying to time cycles. We have the luxury of long-term capital. If a business is good, there will be optionality for capital partners. It's less about a 5-year milestone and more about long-term business building.

Forrest Wilkinson (46:02):
The reality is that underwriting changes as a firm scales. In early growth funds, investors might hope for a 5x return, which requires taking a lot of risk. As you scale to a 2-billion-dollar deal, people are looking for more diversified risk and lower return expectations, like 10-11%. Usually, that results in a higher multiple as you scale.

Seth Fineberg (47:44):
Regarding your level of involvement in firm management—how does it differ when you invest in larger firms versus smaller ones?

Jake Nice (48:18):
There might be a premise that if someone sells, they are disinterested in being involved. For us, it's orchestration to enable, not to disrupt. We're going to be involved to help propel you. When things are going tough, we're there to help figure it out. Most firms partnering with us are looking for that help because they were missing it before.

Seth Fineberg (49:51):
We're creeping up on time. Thank you.