Town Hall: Ask the Experts & Closing Remarks

Our co-chairs return to the stage to wrap up the event, highlighting the most important takeaways from the previous two days, offering their key insights, and taking questions from the audience. 

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):
You've already got questions in the app. Keep them coming and this is your chance to sum them up. If you stump all three of them, I will buy your dreams. They won't actually—you won't be able to sum them because they'll find a way to talk around it or go over it because they're experts. But I would encourage you to put as many questions in there as possible. I've got a lot of questions, but really we'd be more interested in answering yours. Most of what we do is with these three coaches; I'm sure we're all aware if you haven't seen them before at some point today. If not, you wandered into the wrong conference. Basically, we're going to just get our takeaways on the last day and a half of what's been going on and some final points to take home. And again, any questions you guys have. And with that, why don't we dive right in?

(00:52):
Last couple of days, lot of talk, lot of insights, lot of journeys shared. What's your key takeaway on the last couple days? What you learned, heard, or thought about.

Allan D. Koltin (01:05):
The PE world is maturing. We're sort of in this now for year five and it's taking on a whole life. What I probably didn't anticipate was the abundance of the number of firms that would be involved.

(01:26):
We're a product of our past, so I remember what we called Woodstock 1997 to 2001 when Seagraves, American Express, and H&R Block were involved; it impacted just a handful of firms and then it was gone. This, I don't think any of us could have ever anticipated how far-reaching it is. Not just the number of players coming into the market, but firms of all sizes. I think at this time last year, what I'll call the group of 43,000—the firms of maybe four million and less—with some exceptions, weren't that involved.

Daniel Hood (02:16):
Bob, how about you? What takeaways thinking you learned? What's interesting?

Bob Lewis (02:21):
First takeaway is disappointment. The mini donut wall was not out there like it was last year.

Daniel Hood (02:27):
It was a make-your-own donut wall. The donuts were there.

Bob Lewis (02:32):
It was an important part of the event. The main thing that I look at from the takeaways is that this change is escalating at a level I did not anticipate. And if anybody's thinking that this change is going to slow and they can continue to do what they're doing the way they were doing it, they really have to begin to go back and rethink their game plan. There are going to be bigger and bigger firms with more capital. More firms are converting. I know that they get calls all day long; they're dealing with the same types of people that we're dealing with. This is not going away.

(03:10):
And I think that everyone reaches out and says, "I've got to change. Even if I want to remain independent, I've got to change how I play this entire game."

Philip J. Whitman (03:23):

I agree with both of you. I believe I mentioned this yesterday, we haven't crossed the rubicon yet. Yes, there are some big firms.

Bob Lewis (03:41):
75%—six of them—75% gone already.

Philip J. Whitman (03:47):
And when I look at it, everyone will say funds have been picked through, but the reality is meetings are being taken by fiercely independent firms and I believe they're going to remain fiercely independent until they decide they have that proverbial offer that they can't refuse. There's going to be fierce competition. And when you think about the dollars that it's going to require for technology, manpower, or even just to compete in the M&A market. This year, we did four traditional transactions; firms that private equity would probably not be interested in at all. We're seeing cash required by firms that aren't private equity backed to compete in the M&A market.

Daniel Hood (04:54):
I get to weigh in on this because of my microphone. So I'm going to say my big takeaway is how varied this group of people is, and how different the models are. Your deal with a PE firm can be very different from another firm's. There are so many different flavors of it. And then when you add in all the other potential strategic partners—investors, family office money, venture capital, longer-term capital—the number of options that accounting firms have both within PE and outside of PE is astonishing to me. What it means is that you have a lot more options as an accounting firm to figure out the deal that works best, to build a deal that works for you, and to find a partner.

(05:46):
Some of it will require patience, time, and education, but you have a lot more options than you may think you do. A PE deal can be whatever you make of it. Maybe you don't make a PE deal at all and look at other options, but you just have a ton of them and it's going to require you to do the work to build it up.

(06:09):
We've got a lot of questions in the app that are really interesting. No one was asking about how partnerships influence risk management firms. I think they're specifically asking about what changes and what stays the same when it comes to acceptance, continuance, and management engagement risk. Do you see PE firms getting involved at that level of operations?

Allan D. Koltin (06:56):
I haven't seen it. I mean, they want to make sure you have things like engagement letters and client acceptance in place. They're going to look at your trail of litigation just to make sure that it's not garbage in and garbage out, but that really has stayed with the CPA firm.

Daniel Hood (07:15):
I think your insurance company has wanted all those things for decades—engagement letters every time I talk to them. Have you guys seen anything like that?

Philip J. Whitman (07:29):
I think the only place I've really seen it is pre-transaction.

Daniel Hood (07:34):
As part of the deal.

Philip J. Whitman (07:36):
A lot of them that we work with are saying, "We don't want public companies, so you're going to need to get rid of that." They might give you a year to pull that stuff off. For some firms, that could have been a meaningful piece of their practice, several million dollars.

Bob Lewis (08:01):
I would agree with you gentlemen here. It's not so much risk management, but the type of quality of clients they want to fit into. I may be looking at a transaction and going, "This 10 or 20% of my clients I don't want." So we go into the transaction knowing that those clients will probably be jettisoned over the next year or two.

(08:20):
Specifically, regarding PCAOB or any SEC public clients, that's a high-risk factor for a lot of people who don't want to enter into that marketplace. Your peer review should be fairly clean going into it, which will give private equity companies some assurance that the quality is there. But from a risk perspective, that's probably the area that we look at—how they would go ongoing because that's the highest risk. If somebody reviews an audit and there is an issue, it takes the entire firm with it, and that's a concern because they're buying a big important asset.

Allan D. Koltin (08:59):
I was talking to one of the audit partners in charge of an LLP. I asked about their relationship with the consulting side in the LLC and the audit over in the LLP. He said he hadn't talked to the private equity firm at all. I was surprised, but he said it was very intentional. If they were to suggest he look the other way on something, that would be a reportable act. It would blow up the entire investment. So, this idea of the shoe falling and the impairment of audit quality—we're 30 years into models like this and they seem to be going well.

Daniel Hood (10:17):
I'm going to go back and forth between my questions and theirs. I want to start with one piece of advice you would give the firms that are considering private equity. Bob, maybe kick us off on this one.

Bob Lewis (10:35):
I think the most important thing is to make informed, data-driven decisions. People are making emotional decisions—I hear a yes or a no. Look at the data, ask your team, and gather information. The informed decision could be that private equity isn't right for you, or that you'd love to stay independent but don't think you can do it on your own. Don't just let emotions drive the process.

(11:01):
If you proceed, look at the options in the market. There's a difference between a private equity group, an outside investment-backed group, an RIA, or different buyers. Your value may be higher in a specific city. Firms in markets like Houston, Dallas, and Boston are at high premiums. God help you if you can find an independent firm in Nashville anymore; there are only about three left. Those have different value premiums.

Philip J. Whitman (11:47):
I think the most important piece of advice is to have an open mindset. Know that there are plenty of opportunities out there and firms are rolling out the red carpet. Don't just take a phone call and go with the first person that calls you. Explore the marketplace because there is someone who will custom tailor something for you. These are not all the same models and there is significant flexibility.

Allan D. Koltin (12:45):
Either do it or don't, but don't decide too fast. I see a two-partner firm in California where the older partner wanted out, but the younger person didn't want anything to do with it because they were doing great and making wonderful money. She had this moment where she realized, "You know what, this is a business. We need to at least know what's out there." Sometimes people just put the wall up. Keep your eyes wide open; it doesn't mean you're selling the firm, it means you're going to learn.

Daniel Hood (13:41):
We have questions about pricing. People have talked about the need for accounting firms to raise their prices a lot over the last few days. It's generally accepted as common wisdom that accountants don't charge enough. Has this actually been the case this year? And long-term, what kind of price increases do you think are doable for the average CPA firm?

Bob Lewis (14:33):
The hard part is where you're starting. If I'm starting at $100 an hour and another firm is already at $200, I've got a long way to go. Is $200 the right price for the market? I would challenge that. If you're not losing eight out of ten bids, you're bidding way too low. If your clients aren't complaining about your fees, you're underpricing.

(15:12):
I think there is unlimited scaling up on pricing. The worst case is you lose some clients, but the ones you keep have a higher fee, giving you capacity freedom to look for more clients.

Philip J. Whitman (15:26):
I've talked about this a little bit in the past. We did a podcast called The Fearful Mindset around prices. I meet with firms and I'm amazed they're getting less than H&R Block for their 1040s. Like Bob said, if they aren't complaining, you aren't charging enough. You need to test the market.

(18:35):
Until people start saying no eight or nine times out of ten, just keep trying it.

Daniel Hood (18:42):
There's a famous story about magazines in the 30s or 40s. Magazines never used to make money from subscriptions; it was all advertising. They kept raising the price, thinking it would drive away subscribers, but people just kept paying. It completely revolutionized the business.

Allan D. Koltin (19:21):
What happened in 2020 to 2025 was the single biggest five-year increment of fee raising in the history of public accounting. We didn't do it because we got better; we did it because of capacity. From a client standpoint, we have an imaginary report card. We evaluate responsiveness, planning, and intimacy—knowing the family and the story. For the average firm giving average service, they will struggle to raise rates. Great firms don't have that problem.

Bob Lewis (21:28):
We increased our pricing at our office, and the clients said, "I thought you guys were way underpriced." We're like, great, that won't happen again—though it probably still is. Can you retroactively bill? That's the real question.

Daniel Hood (22:04):
What kind of advice do you have for private equity firms looking to work in this profession?

Philip J. Whitman (22:39):
Know your future partners. You really need to dig in. There's the chemistry and all of that, but you need to know who you're partnering with.

Allan D. Koltin (23:18):
I see firms go into business marriages and sometimes the governance is a little loose. Define who is going to make what decision and define the level of input you're going to have so there are no surprises later.

Bob Lewis (23:51):
I agree. Lay out a roadmap and make people feel comfortable with what's going to happen next, because nobody likes change. We're dealing with people's income and mortgages. You've got to make it transparent.

Daniel Hood (24:27):
Do you find PE firms getting involved in making people comfortable, or is it left to the accounting firm leadership?

Bob Lewis (24:55):
They're the first line of entry. In a mid-sized firm, the investment partner is going to come in and make everyone feel comfortable because they need to hear those outside opinions.

Allan D. Koltin (25:26):
It depends on size. In the very large deals, they are very hands-on. In smaller firms, they might be dealing directly with private equity, but in some larger ones, only a handful of people actually met the private equity group.

Philip J. Whitman (25:53):
Frequently, private equity deals with the champion—the CEO or managing partner. After indicating they are going to move forward, they might meet with the executive committee just to give them comfort that this is real.

Daniel Hood (26:46):
Regarding valuation, how do compliance jobs differ from firms that have advisory services? Does wealth management move the needle more than a strong tax practice?

Bob Lewis (27:53):
Compliance work is recurring. A lot of advisory work is project-driven, so you have to have a history of repeat projects. I love the wealth management side. If you combine that recurring revenue with CAS work and augment it with project work, that's how you build an optimal firm.

Philip J. Whitman (28:52):
We recently did a transaction with a valuation fund that was treated no different than an annuity-based compliance firm. We got a very healthy multiple. Most firms we meet with don't have much in the way of advisory services. Some of these larger firms are now thinking about bringing on advisory services with significant referrals coming from their universal firms.

Allan D. Koltin (31:31):
Most PE firms don't like PCAOB audits, public company audits, crypto audits, or cannabis because of federal laws. Regarding Mys in Topeka, Kansas—they were a $50 million firm with $5 billion in AUM and a young partner group. PE firms don't always differentiate between annuity work and consulting. Annuity work is recurring, whereas consulting has to be resold every year. They look at everything and come up with a number.

Bob Lewis (33:34):
For unusual revenue, like ERC credits—that's not recurring. Those things sometimes have to be factored out.

Philip J. Whitman (33:58):
Why do you think a $50 million firm like that joins a platform like Aprio versus being their own foundational firm?

Allan D. Koltin (35:02):
Technology investment. They're looking at how AI and technology are going to transform things. And let's be honest, when an asset is trading at 2.5 times revenue, there is money to be made. Some firms realize they can accomplish things with PE that they couldn't before.

Daniel Hood (37:39):
Bob, what advice do you have for firms that want to remain independent?

Bob Lewis (38:01):
You've got to have an independence plan. Focus on how you generate internal capital to make investments. You have to get the partners aligned and accountable. If one partner is underperforming and writing off too much, they are hurting the compensation of every employee and the firm's ability to get technology. You've got to have a strategy and stick to it.

Allan D. Koltin (39:42):
If you want to remain independent, have a real plan. I sit with partners where some want to remain independent but others can't even agree on what to have for lunch. Sometimes "independent" just means "I'm not capable of having a boss."

Daniel Hood (41:00):
A lot of firm founders just didn't want anyone telling them when they could go on vacation.

Philip J. Whitman (41:17):
Talk to your bank and get a line of credit because you can't just grow organically. You also need to professionalize the back office. Partners shouldn't be handling HR and marketing. Hiring a professional will free up your time to generate business.

Daniel Hood (43:32):
It's worth revisiting independence on a regular basis because things change quickly. Regarding PE cash flows—is the money used for investment or does it just go into their pockets?

Allan D. Koltin (45:02):
There is a budget for spend and investments. They are playing the long game. There are management fees, but if you hit your budget, there are split allocations for partner incentives.

Philip J. Whitman (45:53):
In smaller models, you might still own 40% of the firm and have distributions, which is different from larger groups that plow everything back into reinvestment.

Daniel Hood (46:45):
Final question: How is PE going to change the profession?

Philip J. Whitman (47:06):
We're already seeing changes in governance and professional management. We're running firms more like businesses. For the naysayers: how would you feel 18 months from now with several million more in your bank account and no longer having to deal with HR, IT, or administration? You get your time back. We've only seen about 300 firms do this so far—less than 1% of the industry. Start thinking in terms of value creation and EBITDA.

Allan D. Koltin (50:07):
There's an upper, middle, and bottom third of the profession. The bottom third doesn't qualify for PE because they don't make enough money to create EBITDA. The middle third is dicey. The upper third is where we see the disproportionate number of PE deals because of the economic benefits.

Bob Lewis (51:30):
We're going to be able to do twice as much work with the same number of people through automation and offshoring. Revenue per professional and per partner is going to continue to escalate. We'll be working smarter, helping clients more, and charging more.

Allan D. Koltin (52:08):
The Financial Times noted today that Big Four partner promotions are at a five-year low. They aren't making as many partners because they project more work will be done through AI. It's changing, and things start with the Big Four.

Daniel Hood (52:46):
Thank you, gentlemen. I want to thank our team, our sponsors, and all of you for joining us. We will be in Chicago the same week next year. We're expecting huge changes by then. We hope to see you all again.

(54:28):
Thanks.