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Conflicts and Consolidation: When Private Equity Assembles Teams of Rivals
Strange Bedfellows: Overlapping ownership raises issues of conflict, loyalty, and liability. High-powered law firms help.
Rivals in the Loop: Grant Thornton and Wipfli, now stablemates under New Mountain Capital’s billion-dollar investments, seek to maintain separate operations and arm’s-length decision-making. Shown in Chicago: The Grant Thornton Tower on North Clark (left) and Wipfli offices at the Chicago Title building on Wacker (right).
By CPA Trendlines Research
Grant Thornton and Wipfli keep offices barely a half-mile apart in Chicago’s Loop — about a 10-minute walk, or a single stop on the “L.”
Zoom out. After a generation of competitive drive, the rival firms are now part of the same investor’s stable.
MORE Private Equity | What $1 Billion Buys in Today’s CPA Market
Private equity’s push into accounting is making for some strange bedfellows, as some investment firms build out networks of ostensibly independent firms that increasingly overlap in clients, services, acquisitions and talent markets.
With more than 500 deals under study, the CPA PE Deal Tracker™ from CPA Trendlines Research provides a vivid picture of private equity firms quietly adding a new layer of consolidation as they roll up the CPA profession. Sponsors are evolving into holding companies with multiple platforms, built simultaneously on a number of large CPA firms as acquisition engines. At least five sponsors now hold two or more competing platforms at the same time.
“As the Peter Parker principle reminds us, with great power comes great responsibility,” Proskauer, the private-funds legal powerhouse, says in a client advisory. “Sponsors should remember the portfolio company corollary: with greater control comes greater exposure to liability.”
Ira Rosenbloom: PE Forces Firms to Pick a Future | The Disruptors
PE makes CPA firms rethink strategy – even if they don’t want to sell.
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The Disruptors
With Liz Farr
For CPA Trendlines
With private equity becoming “a real player and a disruptor in the marketplace,” Ira Rosenbloom, CEO of Optimum Strategies, says, the dramatic influx of capital is intensifying competition for quality firms, especially those with strong client bases and growth potential.
MORE DISRUPTORS: Candy Bellau: The $350 Pricing Mistake that Nearly Broke this Boutique Firm | The Disruptors | Poe: What P.E. Really Wants from Firms | The Disruptors | Blake Oliver: Build a Biz that Runs Without You | Daiber: Use Succession as a Growth Strategy | Cannon: Busy Season is Self-Inflicted | Carroll: When One Person Can Break the Firm | Rampe: Build a Roadmap Even When the Road’s Not There | Chang: Killing SALY, One Agent at a Time |
Firms that PE wouldn’t touch are now being approached by brokers without accounting industry experience, hired by PE groups striving to “build an engine,” Rosenbloom says. But the unwanted attention has “helped some of the smaller firms quickly decide they don’t want to go down that path.” So they “take themselves out of the running for a PE situation quicker because of a better understanding of what private equity wants,” he explains.
Allan Koltin: What Elite CPA Firms Do Differently | Gear Up for Growth
The best firms build accountability cultures, develop climbers, and make tough calls.
Sponsored by True Advisor: The Definitive Success Guide for Client Advisory Services by Hitendra Patil | See Today’s Special Offer
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Gear Up for Growth
With Jean Caragher
for CPA Trendlines
“Some firms dream of being great but only are willing to make the commitment to be good,” Allan Koltin, CEO of Koltin Consulting Group, says in the new episode of Gear Up for Growth with host Jean Caragher. “Leadership is the delta that separates all.”
MORE Jean Caragher here | Get her best-selling handbook, The 90-Day Marketing Plan for CPA Firms, here | MORE Gear Up for Growth here | MORE CPA Trendlines Streaming Network here
Koltin says the gap between elite firms and average firms keeps widening, and leadership is the defining factor. Widely recognized as one of the profession’s top consultants, he argues that firms chasing high performance must stop avoiding hard decisions, embrace accountability, and rethink what leadership means.
“You can have the same clients, same talent pool, same market opportunities, and one firm ends up in the upper quartile while another struggles,” Koltin says. “The difference is leadership.” READ MORE →
Private Equity’s Big Bet Faces an AI Shake-Up
But scale may matter more, not less, in the accounting and legal markets.
By CPA Trendlines Research
The same technology that promises higher margins could weaken the billable-hour economics that made professional services so attractive.
MORE Private Equity | What $1 Billion Buys in Today’s CPA Market
Private equity’s rush into law and accounting is running into a new question: What happens to a roll-up strategy built on professional labor when artificial intelligence starts doing more of the work?
Steve Stagner: From Mattress Firm to CPA Firms
Before Rolling Up CPA Firms, Current’s CEO Built a Retail Empire on Acquisitions — Then Watched It Buckle.
By CPA Trendlines Research
Steve Stagner now runs Current, the accounting platform that has gathered more than 40 firms in roughly three years under backing from Thrive Holdings and describes its holding period as effectively permanent.
MORE What $1 Billion Buys in Today’s CPA Market
MORE CPA PE Deal Tracker™: 13 Firms Rolled Up in May. 92 So Far this Year | All 466 Deals for the Last 10 Years | Private Equity’s Accounting Playbook Is Shifting from Dealmaking to Operating Systems | CPA-PE Deal Tracker™: How Big Buyouts Are Turning the Profession into a Platform |
But before he arrived in the profession, Stagner spent a 23-year run building, taking public, selling and then rescuing the largest mattress retailer in the United States — a company whose climb and near-collapse trace almost entirely to the same instinct now reshaping the accounting business: growth by acquisition.