Accounting
PE alternative Franklin Alliance acquires first accounting firm
Franklin Alliance is offering small and midsized firms the opportunity to scale without turning to private equity dollars.
Franklin Alliance partners with accounting firms with less than $10 million in revenue, providing resources to address issues like succession planning, recruiting and technology adoption. It announced Tuesday the acquisition of Bement & Company., a family-owned CPA firm based in the Salt Lake City area, and said it has several other firms under contract.
Firms of all sizes are wrestling with the ongoing talent shortage, rapidly developing technology and a generation of retirement-ready partners in need of succession planning. As private equity comes into play as a solution to these issues, smaller firms are often overlooked.
“Small to midsized business owners, investors and individuals are often underserved, caught between tax preparation shops that provide little strategic value and large corporate CPA firms that lack personal attention,” Brent Bement, owner of Bement & Company and cofounder of Franklin Alliance, said in a statement. “While exploring potential CPA platform partnerships, I found many did not share my vision: to add real value to clients and employees while having sustainable growth without sacrificing the personal touch. That vision is what drew me to Franklin Alliance and why I’m proud to be a co-founder, strategic advisory board member and investor alongside exceptional partners.”
But Franklin Alliance is not private equity. Its cofounder Steve Shein explained that, as an operating company, the typical pressures of a private equity relationship are removed. There is more flexibility, longer timelines and more opportunities for liquidity by way of being funded by venture capital.
“Venture capital and private equity are similar, but they have a lot of differences,” Shein told Accounting Today. “I think one of those is more focused on growth. The other one is more focused on cost optimization. But we are focused on growth.”
Even as a VC-backed company, Franklin Alliance doesn’t necessarily need more funding unlike many other startups. Shein explained: “We are in a different situation because these businesses that we partner with are all profitable. We don’t burn cash. We raise capital from investors to partner and acquire pieces of all these firms. So we’re creating an engine that is cash flow positive, and we can reinvest that capital in more firms.”
Franklin Alliance
Franklin Alliance maintains a “small business ethos,” helping scale and offering operational support while preserving the local firm’s identity and culture.
“The Franklin Alliance model is uniquely positioned to add value to firms in this segment,” Allan Koltin, CEO of Koltin Consulting Group, said in a statement. “Franklin’s structure as a VC-backed operating company allows it to avoid the constructs and potential constraints of traditional private equity funds. I view Franklin’s model as especially beneficial for accounting firms in the smaller segment of the market, where firm cultures are normally less institutionalized.”
How it works
The Franklin Alliance acquires a controlling stake in the firm. (Shein believes it’s important for partners to maintain equity to keep skin in the game.) The company then deploys its resources, such as an advisory board of accounting experts, to help the firm achieve its unique operational goals, whether it be recruiting new talent, adding capital or adopting technology.
“I find this unique platform approach, specifically targeting smaller firms often overlooked by larger firms and private equity in their roll-up strategies, to be particularly intriguing,” Rick Dreher, former head of Wipfli and a strategic advisor to Franklin Alliance, said in a statement.
Franklin Alliance has a broad geographic focus encompassing the Midwest, Mountain Region and South, but Shein said they it’s not limited to these regions. He also said Franklin Alliance does not aim to consolidate firms: “We are intentional about not viewing these firms as add-ons that should be combined into one, larger firm.”
“As someone who was building a thesis on the technology side, I did start to really build conviction that these technologies will make accountants’ lives easier,” Shein said. “And what’s the ultimate way to invest behind that trend? Well, you can invest in the technology providers themselves, which is what a venture capitalist would do, or you can build a platform to buy into these small firms that will ultimately be the beneficiaries of this technology and the way it evolves.”
One of the biggest issuers in the municipal-bond market is warning it may need to scale back its borrowing plans if federal lawmakers eliminate the tax-exemption on municipal debt.
The Metropolitan Transportation Authority, which runs New York City’s transit system, anticipates selling $13 billion of debt to help support its 2025—2029 capital plan. But the MTA would need to lower that amount to about $10 billion if the agency were forced to sell taxable bonds rather than tax-exempt, according to Kevin Willens, the agency’s chief financial officer.
“There’s been discussion of eliminating tax exemption for public sector infrastructure projects, which would be a killer to our ability to raise capital,” Willens said Monday during the MTA’s finance committee meeting.
The MTA had
“Unless we got additional revenue, we’d have to borrow less because debt service cost for every dollar borrowed would be higher,” Willens said in an interview after Monday’s committee meeting.
Tax-exempt debt helps finance public works projects throughout the U.S. Federal lawmakers are working on potential tax reform legislation that may limit the use of such borrowings or even eliminate it completely. Ending the tax benefit on municipal debt would cost states and local governments about $824 billion over a decade, according to a
The U.S. trade group representing restaurants urged President Donald Trump to spare food and drinks from tariffs, estimating the levies could cost the industry more than $12 billion and lead to higher prices for consumers.
In a letter to the president, the National Restaurant Association said companies would have no choice but to raise prices if tariffs came into effect, citing the industry’s already-tight profit margins of 3% to 5% on average. Trump pledged during his campaign to
“We urge you to exempt food and beverage products to minimize the impact on restaurant owners and consumers,” the association said in the letter viewed by Bloomberg News. “This will help keep menu prices stable.”
The group estimated the potential impact assuming 25% tariffs on food and beverage products from Mexico and Canada.
In its letter, which was sent earlier this month, the association praised some of Trump’s plans, including a proposal to
“For many food products, the appropriate climate and growing conditions do not exist in the US year-round to produce the quantities needed for our businesses,” the group said in the letter, signed by Chief Executive Officer Michelle Korsmo.
Food costs account for about 33 cents of every dollar of sales, so tariffs could result in a profit decline of about 30% for the average small restaurant operator, the association said. The group’s members say that rising food costs are among the main challenges to growth.
Restaurants are battling to attract diners following years of price increases across the economy that have caused many consumers to retrench and prioritize spending on other areas. Large chains have rolled out value menus with varying degrees of success. Some, including McDonald’s Corp., have
“Right now, restaurants really do not have much wiggle room,” said Joe Pawlak from food service consulting firm Technomic.
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