Welcome & Opening Remarks & Keynote: PE and the Accounting Profession – A Look Back on the First Term (2021-2025)

Discover the pivotal milestones of the past four years as CPA firms have partnered with private equity. This session dives into how these deals have reshaped firm growth, culture, strategy, talent, and client relationships—offering a clear view of where the industry is headed next.

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 (00:09):
Welcome, welcome back. For those of you who were with us this morning, we were talking about equity, and it's all good stuff. There's a lot of curiosity there and a lot of eagerness to learn about what's going on from our audience. We're bringing everybody together this afternoon and tomorrow to really learn about the impact of private equity, how they're working with firms, and how to help move forward. So we're very excited. Welcome and welcome back to everybody. This is our second annual Private Equity Summit. It's a great gathering. We're seeing the same energy, expertise, and excitement this year as last year. There are more options than ever for firms that are looking for partnerships of any kind. It's fast-moving and exciting. We have experts here to talk about it.

(01:03):
Next is going to be Alan Colton, kicking us off with a discussion of what's going on going forward in the future. Let me just mention housekeeping again. If you're looking for CPE, you want to be scanned at the door. If you have questions about the session registration, the team can help you with them. I think that's all my housekeeping. Again, I thank all of our sponsors and the many people you've seen on the slides throughout this presentation. They really helped make this a successful event; we wouldn't be able to do it without them. We also wouldn't be able to do it without our co-chairs: Bob Lewis, Phil Whitman, and the man I'm introducing to you now from Alan Colton Consulting Group. I think everybody's heard of him. He's one of the foremost pioneers bringing private equity into the accounting space. He works with countless firms. I can't think of a better person to kick off this afternoon.

(02:21):
Wow, look at this place. How many fantastic people are here. It's a thrill to be with so many friends, family, and clients all in one room. I'm going to talk about what has happened over the last four years, but before I go there, I want to introduce some special people in my life. I think many of you know these people and deal with them as part of our organization, but in today's virtual world, you never get to meet them. So I'm going to ask Donna to stand up. Donna, join me.

(03:06):
We started around 1995, right? I always lecture about working on the business rather than in the business. Well, she's the one that makes my life that much easier and runs the business. Thank you, Donna, for everything you do. Angela, stand up if you could. I think many of you talk to Angela every day regarding AI, bots, and social media. Lisa, stand up please. Lisa worked together with the "Winning Everything" program and has led many associations, networks, and alliances. If anybody's looking for talent specialized in sales, creativity, and marketing, she's the person. And two dear people in my life who some of you met last year, my boys—guys, both stand up. Jack Colton and Brian Colton. Jack is the attorney in the house; he works at a firm called Levenfeld Pearlstein.

(04:26):
Nancy Lieberman, great to see you. Let's keep it a secret that Jack is here. And Brian Colton from RSM—you've heard Brian's story before. Brian's an interesting story. I said, "Look, Jack's too smart, he's going to be a lawyer, but you're like me, Brian—be an accountant. You'll always have a job. Try audits." He said, "Dad, shoot me." He did an internship and said, "Not for me." He ends up not in audit, but in transaction advisory doing sell-side M&A and the like. So guys, thank you so much for being here and being a part of it.

(05:20):
Let's get into it. This profession started in 1887. I don't know if you knew that or cared, but from 1887 to about 2020, we lived in a protective bubble. If you stop and think about what we do, we provide services like tax returns and financial statements that most clients don't necessarily want. We call it a Type 1 service. Most of us have moved to Type 2 services—services that clients want and need. 2020 was the year of change; everything hit at once: talent, technology, and private equity. Technology used to be just to keep the lights on; now it's a whole new generation of things that will transform our business.

(06:30):
I remember New Mountain Capital; they were one of the early adopters to say there's a future in the accounting profession. They asked me to reach out to the CEOs of the top 25 accounting firms. Out of 25, 20 had no interest. They said, "We don't need capital." However, three people saw it. One of them will be on a panel later tomorrow: Charlie Weinstein from EisnerAmper, the first firm to go the way of private equity. Second was Joel Cooperman of Citrin Cooperman. The third was Jeff Weiner from Marcum. Most recently, Marcum combined forces with CBIZ to create a $3 billion firm.

(07:34):
The rate of change in the last five years has been insane. I believe the next five years will see more change than the last 100. We were blessed in 2020 when many got PPP money. We also had new services like ERC tax credits and helping people with PPP forgiveness. We had a capacity issue. People didn't want to come into our profession anymore. We started raising rates because of the capacity problem. At many firms, we doubled our rates and half the clients left, but the revenue stayed the same because we got rid of "crappy" clients. I look at 2020 to 2025 as the Golden Age of public accounting.

(08:42):
Whether you're a PE-owned firm or a fiercely independent firm, what I care about is two things: that you have a strategy and a way to make it work. Private equity did one thing that is undisputable: they raised the bar on performance and tougher decisions. Leaders, this is your moment. There's a negative view on private equity sometimes—look what they did to hospitals or medical practices—but in professional service firms like insurance brokerage and wealth management, private equity has done extremely well.

(10:50):
Last week, there was a big announcement with McDermott Will & Emery exploring private equity—the largest law firm in the country. There are hurdles there like attorney ownership, but it shows the direction things are moving. I'm seeing fiercely independent firms taking out ads saying they are independent, and I ask why. I think what clients care about is: "I have a problem, can you help me solve it at a reasonable price with some empathy?" I don't think they care about our internal structure as much as we do.

(12:49):
Probably the most disturbing element is the firm that doesn't explore the options. We don't know what we don't know. In October of 2021, we called this the "great lab experiment." Four years later, there are about 25 platforms in the profession. I don't know of a group not hitting their numbers. Has the culture changed? Yeah, there's more accountability. But we often confuse culture with value. Culture changes all the time as a firm grows. What we should protect are our values—choosing integrity over economics every time.

(14:20):
Let's talk about this alternative practice structure. It was created 30 years ago by firms like H&R Block. Regulators were worried that a private equity firm would influence an audit, but 30 years later, nobody can give one example of an audit going bad because of the structure. I'm finding firms that use the structure just because they think it makes sense to separate protecting the public from advising the client.

(16:41):
Fewer students want an accounting degree, and even fewer want to sit for the exam. This is a people business. The firm that can recruit, retain, and grow talent wins the game. It's all about leadership. Why does one firm have an average partner income of $600k while another has $1.6 million? Leadership and partners being on the same page. The war for talent will be over by 2030 because we won't have the same manual labor problems.

(18:52):
We had the "Great Resignation" in public accounting. I see partners doing manager-level work because they can't find people. We are so busy on the "product"—the tax return or financial statement—that we don't do the planning. We need to migrate from being a "trusted advisor" to a "most valuable advisor." I wish I could tell kids in college how great public accounting is. Today, entry-level work is being automated, which means they get pushed into the fire of advisory work faster than ever.

(21:57):
Private equity exposed the "unfunded chain letter" model of traditional partnerships. Young kids today want a piece of the rock. Richard Cooperman announced their deal and said, "Yesterday we had 60 equity partners; today we have 600 equity holders." Everyone gets a piece of the action. Even fiercely independent firms are now giving buy-in equity that vests over years. We have to be thinking about radical change.

(23:58):
For many, the status quo is great, so change is hard. But look at life insurance agents or stockbrokers—technology transformed those industries into advisory roles. We are next. By 2030, we will no longer be humans preparing financial statements or tax returns; AI and offshoring will do that. This will allow partners more time to advise clients. We need to invest in training the "production" partners to become strategic planners or profit coaches.

(27:34):
AI and offshoring will take over compliance. Start planning today for what 2030 looks like. Whether you stay independent or go with private equity, you must capitalize the firm to make investments. The "India thing" or global offshoring is providing smart talent at a fraction of the cost. I've seen firms where the US team and the India team work as one culture. When you combine AI and offshoring, your firm changes completely.

(30:34):
The value of 80% of what we do has dropped, but the remaining 20%—the "brain and heart surgery" for clients—has grown in value 10,000 times. We can't let this happen and just watch our people leave. Look at the profession: mergers of equals, private equity deals, and publicly traded firms like CBIZ. Outside ownership has figured out the value here.

(33:24):
There have been so many deals over the last seven years. Are there firms left to acquire? The math shows that firms are repopulating and growing larger than ever. Firms with PE are often outgrowing independent firms organically because of the emphasis on growth and profitability. We are shifting away from compliance toward value-added services.

(36:31):
In a PE organization, superstars can be paid what they are worth without being subsidized by lower performers. We saw the "flip" with Citrin Cooperman and New Mountain Capital moving to Blackstone. PE valuation can be two to four times your revenue when you factor in EBITDA multiples and rollover equity. It's a wonderful thing to watch.

(38:50):
There's a new nomenclature: mothership firms, PE-owned firms, and more. It's happening fast. Leaders, this is your moment. I meet with a group of retired managing partners in Florida, and they told me three things they would have done differently: raised rates sooner, taken more risks, and made tough decisions faster. Our industry is undergoing major change and major opportunity over the next five years.