Private Equity Summit 2025 Recap

Hello, and welcome to the Big Four Transparency podcast. This week's episode will be a summary recap of the Private Equity Summit held by Accounting Today 2025. I had the honor and the privilege to speak at this conference based off of much of the data collected from Big Four Transparency, and where I got to kind of weigh in on the whole session was largely representing the employees' perspective in all of this private equity and accounting firm involvement. This podcast is coming out a little bit later after the conference. I was sick as can be after the conference, unfortunately. But we are back, and we're going to have some amazing guests and folks that I met from the conference over the next couple of weeks. So I'm really excited to share that all with you. But in the interim, I thought that, you know, most of the listeners of this podcast would not have been at the Private Equity Summit conference. And so I figured I would give you a few of the highlights, as well as a little bit of a lowdown of what I got to share at the conference. So first of all, conferences in general, I've spoken about this at length, but I highly recommend getting involved in, ideally a little bit more within your area of interest, as well as where you hope your career is going to lead you. But these are a great way to get into the kind of ecosystem of what's going on in the accounting industry, meet like-minded people, and meet people who might even kind of be breaking your frame of reference. Right. You might only know of a certain sort of path for yourself as an accounting professional. And I think in schools and things like that, we're very limited to we're very limited to being shown the paths, the traditional paths of accounting, doing tax or audit or things like that in larger firms, whereas there is a whole world out there that you may not even know about that may actually really benefit you to learn from. So as always, I really recommend that you get out there, meet some people in the industry, learn a little bit about what's going on. But for now, on to the Private Equity Summit. So what this conference is, is realistically, it's largely an excuse for deal making and conversation. I think Accounting Today started it last year and then 2025 was the second year of it running. And you find a lot of managing partners of firms who maybe have taken on private equity and are looking for continuation of growth through more deals or who are learning from other firms who may be more mature in their investment that they've received and who may be further along the journey and learning from what they have done to make that relationship work, as well as how they've deployed the capital to increase growth at their firm. But again, largely, I think this conference is a lot around deal making. So there's a lot of a lot of meetups that happen between before after sessions. There's a lot of kind of private dinners and breakouts of things happening. But there's not only firms who are looking to make a deal there. There are also a lot of firms who are there actually to learn and understand who are maybe grappling with the idea of taking private equity investment, who are afraid of it for a variety of reasons and who want to understand what's out there for them and talk with other people who've taken these deals a little bit off the record to see. Right. Do you regret taking the investment? How have things been going? How has your role changed? And I think that that's a really important environment to be creating for people. So hats off to the folks at Accounting Today for that. In terms of topics in the industry around private equity and where things are leading, I wanted to cover a couple of the big topics. The first sort of headline one is that it continues to become a more and more competitive environment. So as so many of the top 100 firms have taken private equity investment in one form or another, competition for the remaining firms in that segment has increased substantially and private equity investors are finding themselves either paying significantly higher multiples. So multiples are continuing to climb and are kind of expected to do so over the next little while. So some of these independent firms who've resisted thus far, if they do ultimately take private equity investment, will very likely be rewarded for that decision down the line where they may have initially been offered deals at a one and a quarter, one and a half times revenue or so threshold, may actually find deals at a 2x revenue threshold, two and a half times revenue threshold. There's even been talk of offers going out around the three times revenue for certain firms who are very, very profitable and well run as well. So that was an interesting trend to learn about. I get to talk about conversations a lot, but I don't typically get into valuations. And that was actually, it makes sense. But at the time, that was actually a little bit of a surprise to me. I didn't know that multiples had continued to climb as significantly as they have from 2024. There was a lot of talk as well around this sort of industry that's forming around deal readiness. And a lot of this comes not only with relation to private equity, some of it actually can just be applied internally for best practices, for the well being and good operations of the firm. But a lot of it does translate into deal readiness and increasing the multiples a firm may get. So some of the key takeaways from that in my notes here are best practices to consider regardless of your intention for a sale or not, are the cross selling of advisory work or wealth management work. We've heard about that a lot, but these are often the kind of services that will generate the higher the higher revenue multiples as they have much higher margin. Right. So that's going to make a big difference for firms. And it's actually one of the opportunities that these private equity investors are most interested in. So a lot of private equity investors who are buying firms that are lacking in these areas are buying it with in mind the opportunity to add those and cross sell it across a loyal client base down the line. There's a lot of talk about pricing. Bob Lewis, specifically from the Visionary Group, had done a very good session around that and how chipping away at pricing as well as realization, which can kind of go hand in hand, and charging for out of scope work can make a huge difference in the ultimate sale price of a firm as well as a firm's profitability should they choose not to sell. So that I found was a key takeaway that a lot of firm operators should hear is that it's scary to add these service lines. It's scary to kind of step out of your zone of expertise. But doing that definitely is going to make a huge difference, particularly that, you know, I'm talking about things in terms of multiples of revenue, but usually within the investment sphere, these private equity firms are talking more in terms of EBITDA multiples. And so as you do higher margin work, you're going to have more EBITDA. And with a, you know, we're often seeing it sounds like 8 to 12x multiple on that, that can make a huge difference for a firm. And we've even heard of multiples going all the way up to potentially 15x EBITDA in special situations. And when I talk about special situations, that can be a lot of things. Sometimes it can be a strategic fit for a private equity buyer or a firm who's backed by private equity looking to get into a certain space who can really benefit from the addition of a given firm. Other special scenarios that may justify a higher multiple, and this, unfortunately, is not applicable to everyone, but is the ability to have a firm become a platform. So a lot of these private equity investors, where they find themselves is they may have a slew of, you know, two to ten million dollar firms that are interested in working with them in whatever this kind of foray into accounting looks like for the private equity investor, but they're waiting. So these deals are all on standby, essentially pending on finding a flagship firm or a platform firm that they can roll the other things into or potentially kind of cross share services from. So they're looking for the one main firm who can kind of be representative of the overall platform that they represent. And those firms do tend to trade at higher multiples as well. So I thought that was really interesting. There's a lot of talk about charging for out of scope work, making sure you're limiting your write offs. So in doing this planning work, communication with clients is key and making sure that, you know, there's an agreed upon price or scope of what's included in the services. So any kind of request beyond that can actually be charged for. That's something we've spoken about in the past. But a lot of accounting firms and firm operators are typically a little bit poor at doing that. We are helpful by nature and we want to get involved in a cool project and sometimes forget to have the difficult conversation around actually making sure that that work is being compensated. And another big, big point that I took points that I took notes on is the importance of succession, even in a private equity transaction. So some firm leaders view this as a way out. Right. So they may be a strong leader themselves who can who can sell drive business for the firm. And they have a whole bunch of employees under them who are really good at doing the work. But a lot of firms are really missing is is the succession piece of who's going to be driving business for this firm. So an over reliance on the owner operator who may be interested in selling or retiring down the line is actually really counting against the firm when it comes time to do this transaction. And so succession becomes really important. That's something that I hadn't considered as much. I thought this was maybe an alternative to having a proper succession plan in place. But a lot of these transactions are actually really reliant on there being an internal succession plan, particularly some of the private equity investors who allow the firm to continue to operate mostly independently, whereas firms who maybe don't have proper succession planning in place are going to be limited to a pool of buyers who just want to absorb the practice. Right. So they can maybe sell to one of these very large acquisitive firms like a Citroen Cooperman or an Aprio down the line if that's what they're looking for. And they don't have anyone internally who can continue to operate the business. And so by limiting the pool of buyers, you're also limiting the value of the practice as a whole. So that was a big takeaway that succession is a huge key and it's something people are really, really, really struggling. So if you're an employee at an accounting firm, maybe displaying some interest in business development activities is something that you can kind of take away as an underserved area of most firms. And there may already be a couple of rainmakers at the firm, but they need to be vetting and and training the next generation of rainmakers for that firm who can make these deals happen. So I thought that was very interesting as well. That was a path that had interested me in public accounting is being very heavily involved in the business development side of things. And I found that that was under invested in and under rewarded in my own experience. So, you know, they're more than happy to send you to all these conferences. But there was no sort of compensation in place or there was no adjustment of one's evaluation metrics early on in the firm journey for someone who was displaying the ability to sell business or help, you know, kind of pitch new, new offerings across the client base. So I thought that was really interesting. Another key takeaway is that private equity will be moving down market in 2026. A lot of the competition, like I mentioned in the top 100 firms who have not yet taken investment or or will not, is really limiting the market. And there is still a growing level of interest among investors. And so one of the ways around this is that we're seeing a lot of investors more focused in the five million and under range when it comes to investment. This is something I think is is interesting. A lot of challenges there, in my opinion, when it comes to the talent. I think a lot of people have chosen a small firm for some of the kind of values that that small firm may have a close relationship with ownership, you know, ability to be part of the succession later on. So I think that's interesting. I think that presents some kind of unique challenges, though, but something to keep an eye open for in 2026. And then another kind of tidbit that was shared from people on the inside, people in the know. So Alan Colton, who's behind a lot of these sort of deal making parts of these transactions, revealed that we are going to see at least three or four already that he knows of flips in 2026. So basically, so far, the only notable flip has been Cedric Cooperman, who changed hands in terms of private equity backers and who who basically got to show a multiple on that on the investment that happened in that firm. And for Citroen, I believe it was around a three point eight X return on the investment in a time horizon of around three and a half years. And so that's super promising and has driven a lot more private equity activity into the space. And we're going to see a lot more of those flips happening in next in the next year as some of these have come to maturity. Right. So that a lot of the deal making kind of started around the 2021-2022 time frame. So some of the earlier exits are going to be starting to happen. So I thought that was interesting as well, because we're going to get more data on how this is all working out, at least financially. You know, I'm working on a study to figure out how this is working out from the employee perspective, but from a financial returns perspective, which is driving all of this activity, we are seeing that we're going to get a lot more results in the next year, which is very interesting as well. And then kind of on to my session and my involvement in all of this. So I got to present about brand pay and perception of private equity in the accounting space. And essentially, a lot of the data that big four transparency collects can be a little bit of a signal of how things are going versus how people are reacting to private equity deals at face value. So one of the data points that I presented on is the swing in job satisfaction that happens when a private equity deal is taken, where as soon as the announcement happens and as soon as the deal rumor is leaked, at least we see a pretty sharp decline in job satisfaction, which shows us that and I mean, people already kind of know this, but that shows us that the perception of private equity, just the mention that the firm is going to be exchanging hands in terms of financial leadership and who's holding the equity is viewed very, very negatively by employees. And what we're seeing after the deal happens is typically towards the first year, all around the first year, the job satisfaction responses on big four transparency are significantly lower than before the deal was announced. And then once we get into 18 months post deal, things actually stabilize quite significantly. And we see that job satisfaction is almost back to where it was. Another kind of key finding I was able to find is that on average, hours worked at private equity backed firms are slightly higher, but the increase in salary growth is actually a bigger difference percentage wise after a few years than the increase in workload. So based again off of the data that we collect, we're able to see that based on those on those metrics, it isn't all bad. There's some bad that comes with some good when it comes to salary growth. Another big area that we're able to talk about a lot, I was also part of a panel as well as a keynote, is the representation of communication to employees. So in a lot of these deals, there's a big lack of communication around the what's in it for me from from either the private equity buyer or firm leadership to, you know, let's say the the average tax senior at the firm or the tax manager, or even more importantly, the senior managers at the firm who've just seen a change in definition to what their partner path looks like, which is a very meaningful kind of carrot that's changed, that's changed. So nobody likes that change. I was able to express a lot of the frustration people have around that lack of communication and point out some best practices. So among the private equity back cohort, I've talked about this in the past, but Aprio is one of the or actually was the highest rated in terms of job satisfaction and actually was outpacing the overall market in terms of job satisfaction. And one of the things I think is is a key differentiator is that communication of the what's in it for me. So a lot of people, you know, manager level or even senior or even senior level at some of the other firms had been given equity as part of this deal. And the firms that were doing the best on job satisfaction had a clear communication of that equity value and what that potential payout to the employee was going to be on the equity that they hold, as well as clarity and how much they might be able to vest between now and the next deal. So a best practice by Aprio is that they have actually a monthly internal valuation that's done. And I think actually maybe even an independent valuation that's done that's used in their existing dealmaking that is communicated very, very openly to employees. So you can see I had a bunch of shares granted to me that were worth one dollar. And I say shares loosely. Often this is actually phantom equity, but represents a financial benefit to ownership. And those shares that were a dollar a year later are now trading at two dollars. And so I'm actually getting a chunk of this. Even if I leave today, if I have sort of vested this phantom equity in a deal were to happen, I would benefit by this exact dollar amount. So that was a key part of it. Another part was around restructuring, where some of that happens, where tensions are very high when this happens. And so if there is restructuring, you should do it very quickly and communicate it very openly. But if there is not going to be restructuring, it is equally important to communicate that to employees because the assumption is that it's going to be a worst case scenario, basically. And if you tell me nothing, I'm going to assume the worst for myself. I believe the slides of my presentation are going to be shared on Accounting Today on the Private Equity Summit website. So I'm going to look to see if I can link the slides of my own presentation. But yeah, that's kind of largely what I was able to communicate to the crowd at Private Equity Summit. And I do think that that got through to a lot of people, which is great. And personally, this was a huge honor to be able to do this. And I'm really grateful to the audience of Big Four Transparency, to everyone who's contributed data for this opportunity, because I get to be a voice in the room now and actually represent the interests of the employees of these firms. Whereas other than my session, pretty much every session was all tailored around the interests of only the partner group or only the private equity investor group. Whereas there was a very, very stark lack of discussion around where do employees benefit from this? Why are employees wanting to stay at this firm? And it was a really cool experience to be able to represent people there. So that's sort of my quick summary of the Private Equity Summit, as well as my session. I hope you get some value from this. I hope that you may attend next year, if not this conference, then any other conference in the accounting space that maybe aligns with your personal area of interest or what you would like to grow towards. And I'll see you next week with some great guests, hopefully from the Private Equity Summit. Thank you very much.