CohnReznick is planning to expand after becoming the latest major firm to receive a private equity investment, through funds advised by Apax Partners.

The deal with Apax was announced late last month and will cause the New York-based Top 25 Firm to set up an alternative practice structure, splitting the attest and non-attest sides, as has become common with PE-related deals. Once the transaction closes, CohnReznick CEO David Kessler will be CEO of CohnReznick Advisory LLC, on the non-attest side, while assurance partner Kelly O’Callaghan will become CEO of CohnReznick LLP, the attest business. 

The amount of the investment was undisclosed. The funds advised by Apax, alongside with an independent co-investor, will collectively own a 51% stake in the non-attest business. 

“We’ve had discussions in the private equity arena for a couple of years now, and we made the decision over this past summer that this was the right path for us, and we ventured down the process,” Kessler told Accounting Today. “Apax was very aligned with our management strategy, and we feel it’s going to have an impact on our growth in the future, and we’re looking forward to partnering with them.”

He believes the deal will add more capabilities for the firm to expand geographically in its existing areas as well as new territory. “We’re very heavy in the Northeast and the Mid-Atlantic, and we want to expand in the Southeast, Midwest and West Coast,” said Kessler. “We have a good presence right now in the Southeast, in the Midwest and on the West Coast, but we think this is an opportunity to expand our footprint and then also to really bring in advisory firms that we feel are compatible to the industries and clients that we serve, so we’re looking at this as an opportunity to really accelerate our growth.”

Both Apax and CohnReznick representatives will be on the board of the advisory entity, but only CohnReznick partners will be on the board of the attest business. “All of our partners will be partners in the advisory entity, along with Apax funds, and only our attest partners will be partners in the attest entity,” said Kessler.

The firm had been approached by a number of PE suitors in recent years. “We’ve probably spoken with a dozen to two dozen private equity funds over the past three years,” said Kessler. “We’ve been trying to educate ourselves on the benefits in the alternative practice structure and the model and what it would be for our staff and our clients and our partners. We spent a lot of time with a lot of different private equity funds looking into what a potential partnership could look like.”

While he and other partners liked many of the PE firms they spoke with, he said one of the things that stood out about Apax was its culture. “We really liked how they took the time to understand us and our history and how we got to this point in our vision and our strategy growing in the future, and we felt like we were aligned on the growth strategy,” said Kessler. “And we liked the fact that they did their homework on us. I think we gained a mutual respect for each other.”

O’Callghan agrees. “Partnering with Apax, they really did believe in our growth strategy, our culture, which we think is very special and important, as well as our talent and the people that we have now,” she said.

The firm has approximately 350 partners and 5,000 global employees, including 4,000 people in the U.S., and approximately 1,000 in India and the Philippines. CohnReznick has been able to double in size in the last five years, largely organically, while also doing some strategic acquisitions in key locations, Kessler noted. He would like to enhance the pace of acquisitions and the technology used by the firm internally and for clients. Partnering with a PE fund will help accelerate the firm’s ability to advance the tech projects that are already in the works over the finish line. 

O’Callaghan predicts the deal will create greater opportunities for the firm’s people as well as create opportunities with a larger platform for their career advancement. She has been the service line leader for assurance of the firm’s largest region, the Northeast, and also the partner in charge of its relationship with the AICPA for years. She has worked at the firm for 25 years, and Kessler for 39 years.

“When I started, we had two offices, so we were able to grow from two offices to 29 and $1.1 billion in revenue, and we think this will be the next acceleration,” said Kessler.

The deal was valued at $2 billion, according to The Wall Street Journal, but Kessler would neither confirm nor deny that figure.

CohnReznick plans to use the extra funds to expand its audit and tax practice as well as HIPAA advisory, client accounting services, performance improvement and transaction advisory services, and more. 

“We’re looking to enhance all the existing areas that we’re in and always identifying new areas to grow into, but we’ll continue to evolve as we always have,” said Kessler. “But the advisory practices that we currently are involved with are seeing a lot of traction, and we plan to enhance those services.” 

One area where CohnReznick has been seeing growth is public and private partnerships to help build infrastructure like airports, train stations and highways. In 2022, the firm helped monitor redevelopment of New York’s JFK Airport.

“We’ve done some work with the airports,” said Kessler. “We’ve done some work with Union Station in Washington, D.C. train and California highways, so we have a good project finance group. We do a lot of work with financial modeling, and infrastructure is one of the areas that they focus on, as well as all real estate credit incentives.”

Emergency management may be another area with the rise in natural disasters. “I think there’s a lot of opportunity across every single state, and one of the areas we focus on is emergency management and doing project management of large financial distributions that states are responsible for,” said Kessler,

Audit and attest service expansion will probably depend on the uncertain regulatory environment. 

“Right now, I see us focused on our core assurance practice,” said O’Callaghan. “If there’s new opportunities that present themselves through the regulatory environment, then we would absolutely entertain those potential opportunities, but that’s really driven by regulators.”

The new Trump administration is likely to pursue fewer regulations on auditors and accountants, but the changes are hard to predict. 

“I think we’re still vetting out what those changes are going to be,” said O’Callaghan. “It’s been almost two months now with the new administration, so we’ll have to see. Things are moving quickly, but we’ll have to see where everything falls out at the end.”

They’re both hopeful about the prospects for the firm and the overall accounting profession. “We think this is an exciting time for our profession,” said Kessler. “We’ve been in this business for a long time, and our partners have been in this business for a long time. It’s just an exciting time for our profession when you have institutional capital, and particularly private equity funds that are smart and are investing in the profession. They’re investing in the growth and the quality of the profession, and it’s just exciting to be a part of it. It really feels like we’re at a precipice to advance how we serve our clients, and it’s just an exciting time to be a CPA.”

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This is a strange topic to bring up during tax season, but it is as good a time as any to take stock of your practice and your long-term goals. This is a two and a half-minute read and hopefully you will read it a couple of times, and then will dedicate some serious thinking about it after tax season when you are more relaxed.

Reason 1: You do not want to grow. This is a personal decision and, if that is your decision, then there is nothing wrong with it and you shouldn’t obsess over it. Do what is necessary to maintain your practice as it is now so it will continue that way as long as you want to keep working.

Reason 2: You do not delegate delegable decisions. That means you are not using leverage to pass on every task that can be done by someone else. You tend to want to make every decision. In many cases it is important for you to make the decision, but it cannot be so in every case. Delegate more. Part of growing is for your staff to also grow. That growth comes when they are empowered to take charge, supervise and make decisions. I can pretty much guarantee that some of those decisions will be wrong, so do not delegate decisions that could put a client, or you, out of business. Everything short of that can be handled when a wrong decision is made. That is part of growing. Think of a baby learning to walk and the many times they fall until they finally do not fall. What is that smile worth?

Reason 3: You run your firm as if it were a CPA practice and not a business. You are in a business that happens to perform professional accounting services. You are first a business owner and manager and second, a CPA. If you could not succeed in your own practice, you would still find work as a CPA, but it would just be in someone else’s practice. Being in business means you have the ultimate responsibility for everything that happens in your business. This also means you need to control it, oversee the quality, handle the hiring, perform the marketing, manage your customers, and get regular financial reports and daily key performance indicators to help you manage better. You also need to strategize and plan the growth. A hint on how to perform your ownership functions is to do what you would tell yourself to do if you were your client. Work, manage and lead as an owner.

Reason 4: Evaluate everything you do with a long-term view. You are not in business to get tax returns out the door, but to provide professional services to people who rely on you and pay you for that. Short-term fixes do not provide long-term benefits, processes, procedures and duplicable practices in repetitive functions. I know many accountants who start every year and every tax season where they left off last year. That is not growth and not working off of a sustainable business model. Serious reflection should be made over every part of your practice. You can identify most of the important issues and then pick the more serious ones, or the most serious, and start with those. Spending time trying to improve, streamline or fix the most serious issue confronting your growth ain’t such a bad idea.

Reason 5: Insufficient cash flow. Continuously being short of cash thwarts clear thinking about growth or anything not directly related to getting the cash to pay the payroll and other bills. The cash flow needs to be worked out. I recently wrote a column on how to deal with this. If this is a problem, concentrate on getting this worked out so you will have a clear head to develop a clear direction. Tax season is a great time to get this done — consider an extra increase for every tax return you are working on right now. Delaying or denying this will delay or deny your growth.

This is a good short list with some takeaways that could be implemented pretty quickly. There are many other reasons and things you could do, but any of the above is a good start.

Do not hesitate to contact me at [email protected] with your practice management questions or about engagements you might not be able to perform.

A UBS Group AG unit was found guilty by a French court of harassing two whistleblowers who lifted the lid on the bank’s efforts to help wealthy locals dodge taxes.

UBS France — as the unit was known during the investigation — retaliated against its former auditor Nicolas Forissier by sidelining him and refusing to promote him to executive director after he disclosed information to bosses within the company, the Paris criminal court ruled on Monday. 

“UBS was trying to bully its employee,” the lead Paris judge said. The court also found the bank guilty of penalizing another whistleblower, Stéphanie Gibaud, who helped French authorities spy on clients at an event organized around the 2011 Roland-Garros tennis tournament.

UBS Europe, which took over from the unit, was fined €75,000 ($81,300) — the maximum allowed by law at the time of the wrongdoing. The court also granted Forissier €50,000 in damages.

The harassment case is an offshoot of a wider legal saga in France that has been going on for more than 15 years. It culminated in a money laundering conviction for the Swiss bank as part of a prosecution effort that stemmed in part from the Forissier report.

That separate case isn’t entirely finished after France’s top court said in 2023 that a €1.8 billion penalty UBS had received should be reexamined, opening the door to a possible cut.

UBS said in a statement that it disagrees with the conviction, which it finds “unjust.” The Swiss bank said it will “analyze the decision and decide on next steps.”