Cohen & Co., a Top 50 Firm based in Cleveland, is the latest firm to receive a private equity investment, in this case from Lovell Minnick Partners.
LMP is a New York-based private equity firm that focuses on investments in financial services, business services and financial technology companies. The amount of the investment was undisclosed, and Cohen did not reveal whether or not it represents a majority or minority stake in the firm. The investment is expected to close on Dec. 31, 2024, at which point the firm also plans to substantially increase the number of employee equity holders.
“We’re excited to take on a strategic investment from Lovell Minnick Partners to help drive the firm to the next level and continue on into the future,” said Cohen & Co. CEO Chris Bellamy in an interview. “We’re excited to take on the capital and invest in technology, process improvements, identify potential add-on acquisitions, as well as potential lateral hires, as we have a really good track record of doing both. We’re excited to adopt the new model, expand our ownership group substantially as a result of the transaction, and position the firm for future success.”
Like several other accounting firms that have accepted PE funding, Cohen will set up an alternative practice structure. Cohen & Company, Ltd., a licensed CPA firm, will provide attest services and will be led by Vince Curttright. Cohen & Co Advisory, LLC, not a licensed CPA firm, will offer business tax, advisory and other non-attest services, and will be led by Bellamy. Although separately owned and governed, the two entities will both use Cohen & Co as their brand name. Under this new structure, partners and professionals of Cohen & Co will continue to work together serving clients.
“We will split into the traditional alternative practice structure, with Cohen & Co. retaining the attest firm, and Cohen & Co. Advisory LLC becoming the advisory and tax entity,” said Bellamy. “We’re targeting a 12/31 close, which will align with the restructuring as well.”
The firm plans to use the extra funding to grow. “We will continue to invest in the firm through technology improvement, expanded staffing and continue to grow via acquisitions as well as attract lateral hires,” said Bellamy.
LMP partner Jason Barg led the investment into Cohen & Co. “Our view is that Cohen is really well positioned for taking on a private equity partner, and the additional capital will help an already established and growing firm to continue on that trajectory and even accelerate it,” he told Accounting Today. “Cohen has got a great history of serving its clients, being known for its specializations and high-caliber personnel, and we believe the funding will further enhance that market position.”
Cohen & Co. has been expanding its SEC audit practice, coming out in first place last year by a wide margin, according to an analysis by Ideagen Audit Analytics.
Cohen & Co. periodically does mergers and acquisitions. Last year, it added Szymkowiak & Associates CPAs and its affiliate, Pear Consultants LLC, in Buffalo, New York, as well as BBD’s Investment Management Group, a Philadelphia-based provider of audit and tax services for registered and unregistered investment companies. In 2017, it added Arthur Bell, a firm that specialized in auditing mutual funds, exchange-traded funds, hedge funds and investment advisors. The BBD deal yielded 54 new audit clients. Overall, the firm brought on 62 new engagements last year, and netted 57.
More mergers are likely as a result of the extra funding. “We are always strategically evaluating opportunities in the marketplace, and we’ll continue to do so,” said Bellamy.
The firm had been mulling PE funding for some time. “As part of our regular, ongoing planning exercise, our board and our leadership team have continually evaluated strategic alternatives, including taking on private equity investment as well as other potential scenarios, and that’s been something that’s been ongoing for the better part of 12 months,” said Bellamy. It has also been a regular exercise that the firm has done over its 47-year history,
As far as areas of the country or specialties where the firm might expand, Bellamy said the firm would continue to evolve and be responsive to the needs of its clients. “We have several national industry verticals and we’ll continue to focus on growth, as well as growing within all of our existing geographic markets as well,” he added.
Cohen & Co. was founded in 1977 and has more than 800 dedicated professionals across the U.S. and 12 offices in Illinois, Ohio, Maryland, Michigan, New York, Pennsylvania and Wisconsin.
“One of the things that really attracted LMP to Cohen is that within the verticals that they focus on, whether it be real estate or some of the other areas of focus, it’s a firm that really has a national caliber,” said Barg. “It’s well known within its sectors, beyond its regional hubs. We knew of Cohen & Co. for many years because of that capability. We knew them as an industry participant for many years and thought really highly of them. We do think it’s a strong launchpad to further build on those capabilities.”
One of the reasons why Cohen & Co. was attracted to LMP was its expertise in servicing middle market companies as well as its involvement in the financial services arena, Bellamy noted, adding that LMP has significant overlap with several of Cohen’s key areas of expertise.
The firm had been hearing overtures from various PE firms. “From the Cohen side, we’re always open minded and have had several conversations with market participants over the history of the firm,” said Bellamy. “We have known of LMP through some mutual relationships, and we’ve had mutual clients that we’ve also interacted with, so it was easy to pick up the phone when we received the inquiry,”
LMP had also been looking at CPA firms. “We as investors have spent a lot of time working in this specialty consulting area, working with human driven, people driven businesses,” said Barg. “Given the growth trends in the sector, the benefits of taking on capital and the fragmentation of this space, we believe that a well-positioned CPA firm has a great opportunity for growth. We’ve talked to a number of firms over the years, and we hit it off with Chris and his colleagues. We thought very highly of the firm before we got to even know them on a personal level, and then we developed a dialogue leading into this investment. It became very clear that we see the world the same way. We have a strong alignment in terms of where Chris and his colleagues want to take the business. It made the transaction discussions and investment discussions very straightforward. From our standpoint, we became very enthusiastic about partnering with this group of people.”
“We are excited to collaborate with Chris, the management team, employees and clients
to continue to build on their successes and support their growth trajectory,” said Tom Hutchins, a principal at LMP, in a statement.
Cohen & Co, also liked LMP’s background. “LMP’s experience operating in regulated industries was really important to us,” said Bellamy. “We are a significant public company auditor, given the stature of our registered fund practice and the background and the due diligence and the homework that the LMP team has done in the space were truly refreshing, and their willingness to collaborate with quality and risk management top of mind is really important.”
Hunton Andrews Kurth LLP served as legal counsel to Cohen & Co, for the deal, while Sidley Austin LLP served as legal counsel to LMP.
“We’re truly excited for the future,” Bellamy said. “We’re looking forward to enhancing our ability to achieve our strategic plan, to be a premium provider of services in the markets and industries we serve, to drive operational excellence and to be the employer of choice, and we’re excited that LMP will be our partner along for the ride.”
Jean Bouquot, previously deputy president, was elected president of the International Federation of Accountants to serve a two-year term through November 2026, and Taryn Rulton was elected deputy president. The IFAC also appointed to the board: Josephine Su Han Phan, Michael Niehues, Patricia Stock, Mark Vaessen, Lei Yan and Ahmad Almeghames. (Read the full story.) In other news, IFAC selected Sheila Fraser of Canada and Andreas Bergmann of Switzerland as the 2024 recipients of the IFAC Global Leadership, recognizing their outstanding contributions to public sector accounting.
Comedian Lil Wenker announced she is touring her solo show, “Bangtail,” a clown western about a cowboy-turned-accountant searching for his purpose, based on her accountant father, which includes a performance Nov. 22 in New York.
President-elect Donald Trump offered up a long list of promises during his campaign, and next year will bring a major test with the upcoming expiration of many of the provisions from his first administration’s Tax Cuts and Jobs Act of 2017.
“No one has a crystal ball on what’s going to happen here, but certainly it’s a little bit clearer based on a Trump victory than it would have been based on a Harris victory,” said Brian Newman, a tax partner at Top 25 Firm CohnReznick in Hartford, Connecticut. “Obviously the big point is going to be either to extend or to make permanent TCJA provisions.”
Trump has also called for lowering the corporate tax rate, which was supposed to be made permanent with the TCJA. He has proposed to lower it to 20%, or 15% for companies that manufacture their products in the U.S.
“Going from 21% down to 20% may be a much easier sell than layering on something that would get the corporate rate down to 15%,” said Newman.
Trump has also called for bringing back 100% bonus depreciation. “Right now the bonus rate is at 40% and scheduled to go down to 20% next year,” Newman continued. “There’s been a push to get that back up to 100%. If that occurs, we’ll be talking to our clients for year-end tax planning about deciding on whether to delay placing an asset in service a month or two if, in fact, we think that we’re going to go back to 100% bonus, versus buying something this year and placing it in service this year. There are always transition rules. That’s something that we have to be cautious about. That’s something that is going to be closely watched, because it could have a significant impact on clients.”
On the other hand, parts of the TCJA could be jettisoned. Trump has also called for eliminating the act’s $10,000 limit on state and local tax deductions, also known as the “SALT cap,” for individuals, or raising it.
“It’s an easy discussion to tell clients, if you have property taxes to pay, you’re probably better off paying the property taxes January 1 versus December 31 in the hopes that something does get passed,” said Newman. “You might get a benefit for it, versus now in 2024 you know you’re not going to get a benefit.”
The treatment of R&D expenses involves another provision of the TCJA that could be eliminated. “The last couple of years, taxpayers have had to capitalize their R&D costs and then amortize them over a five-year period,” said Newman. “That’s had a significant impact on compliance and the bottom line of taxable income. Trump has said that he would like to get those expenses currently deductible again, which would be helpful for businesses that have R&D expenses.
The Section 163(j) limitation on business interest could be another area where TCJA provision would be eliminated. “Currently, your adjusted taxable income does not include adding back depreciation and amortization like it did in the first few years of the TCJA. President-elect Trump has said that he would be in favor of going back to an EBITDA calculation so that you can add back your depreciation and amortization, which would make the limitation less painful for clients. That’s another area that I think you’re going to see some tax law changes.”
Some of these business tax changes were passed by the House earlier this year as part of the Wyden-Smith Tax Relief for American Workers and Families Act of 2024 but never got through the Senate because of disagreement over other provisions, such as expansion of the Child Tax Credit.
Trump has also called for not taxing income from tips, Social Security and overtime, as well as eliminating taxes on firefighters, police officers and members of the military.
However, that could encourage people to reclassify their income as the tax-exempt kind.
“It will always be interesting to see exactly how those things work and how they’re calculated, because everyone’s always looking to maximize what income is not subject to tax or may have lower tax rates,” said Newman. “But you have to make sure that you know, things are properly defined, and that ultimately, you know, we have a clear guidance on what the calculation should be.”
Trump has also called for eliminating the stock buyback excise tax for public companies that buy back their own shares of over $1 million in a taxable year. “Right now, there’s a 1% tax on that,” said Newman. “The Biden administration has proposed increasing that to 4%, but President-elect Trump has said that he would be in favor of eliminating that tax.”
He believes the qualified business income deduction under the TCJA will also be closely watched, “People would be looking for that to either get extended or made permanent,” said Newman. “That’s a 20% deduction on certain flow-through income, which has been very beneficial to people who it applies to. Unfortunately, it does not apply, for the most part, to accountants and other professional services organizations.”
Trump has also called for doubling the standard deduction as it was in the TCJA. That could cause even fewer people to itemize their deductions. “There’s a good amount of people who don’t itemize because the SALT cap is limited to $10,000 and then if you don’t have large home mortgage interest or other itemized deductions, you’re not getting over the standard deduction threshold as it currently stands,” said Newman. “If you double the standard deduction, there will be less and less itemizers, and those types of deductions don’t become as valuable.”
That may prompt donors to reduce their charitable contributions if they can’t itemize the deduction.
Trump has also called for other tax breaks, such as tax credits for family caregivers taking care of parents or loved ones, and allowing those who buy an automobile made in the U.S. to write off the interest on their car loans.
All those tax breaks may prove difficult for states that rely on income taxes from their residents and can’t afford to let their deficits run wild. “Year after year, the state tax liabilities on transactions and income are becoming more and more a larger component of the total tax burden of both companies and individuals,” said Newman. “One of the things that states like to do is decouple from federal provisions. We always want to keep in mind, even if you get new provisions at the federal level, if they’re not already decoupled, you may get decoupled on provisions for the state. For instance, if President-elect Trump is successful in exempting, say, overtime pay, you may get a lot of states decouple from that, and the states will still tax that.”
Trump’s tax policy will also depend on what Congress does and how much control Republicans will be able to exercise, especially in the House.
“Tax was not the focal point of the campaign, and when it did emerge as an issue, former (and future) President Trump presented tax policy ideas largely in broad strokes, though he also had no small number of new ideas for voters to consider,” said Jonathan Traub, managing principal and tax policy group leader at Deloitte Tax LLP, in a statement. “Of course, tax legislation generally originates in Congress, not the White House, so any new tax laws enacted will bear the imprint of the legislative branch with its many competing interests and priorities. And, just as importantly, the ability of the Republicans to use budget reconciliation to fast-track major tax and spending bills to the White House depends on the outcome of a handful of uncalled House races around the country.”