Accounting
What accounting firms should consider before taking private equity
With private equity knocking on accounting firms’ doors, firms are in no short supply of suitors.
Firms making private equity deals — either for the first time or as they look for a new sponsor as their investments nears its close — have much to consider. Firms need to ensure that their unique goals are met when making a deal, whether that is locking in a large multiple for the retiring partner, making sure existing clients are well served or guaranteeing employees are taken care of.
In broad strokes, experts say firms should compare the cultural compatibility of their firm with their tentative PE partner.
“How are you going to treat my people moving forward? People are your assets, so there has to be a really strong cultural fit, and it’s a quick view for what integration into that strategic might look like,” said Tim Brackney, CEO of Springline Advisory, a Top 100 Firm with $89 million in revenue and 365 employees. Springline is a
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But looking at specifics, firms need to be doing as much due diligence on their PE partner as PE is doing on them.
“It’s a relationship that’s going to cover the next path of your journey,” Brackney said.
He added that the market is competitive enough to ask those kinds of questions very directly: “It’s like, we’re going to be in the canoe together for the next five to seven years — what’s that like?”
That can mean researching what the PE firm’s exits look like, talking to CEOs who have exited with them in the past and identifying who would sit on the accounting firm’s board of directors. It also means taking a close look at the terms of the deal.
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Bob Lewis, president of consulting firm The Visionary Group, says to eye things like management fees. “If you get a 5% management fee on revenue, why? Because that just comes out of your distribution center, which means if you hire the partners, the distributions are shrunk from the management fees,” Lewis said.
“Preferred dividends mean the private equity company gets paid their dividend on their investment before anything gets distributed,” he continued. “So if there’s not enough money left over for distribution, you and I get nothing because it went to the preferred dividend.”
He also highlighted earn out targets: “If I really want to get you, I draw you in with a pretty attractive offer, but I put an earn out target in there that I know you’re not going to hit,” Lewis said, noting that most PE firms won’t do that because it causes problems down the road. “But if you’re getting a really high offer, you have to kind of wonder why. What am I getting the high offer from, and is there something loaded in the back like a management fee, preferred dividend, an earnout target you’re not going to hit, really excessive working capital, which you need to contribute to the deal?”
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“Everyone gets hung up on the multiple, but they’re missing the point that the multiple is just a factor in the equations,” Lewis said. “It’s the adjusted EBITDA, and how I get to the adjusted EBITDA is probably more important than anything.”
Ultimately, it comes down to vision alignment.
“Hopefully, what they did in the beginning was pick a partner that was aligned with what an exit would look like for them,” Brackney said, while noting that not all firms have done that.
“If you picked a partner to create a firm, and not create something to flip to another strategic, then what you’re doing at the turn is saying, ‘We poured the foundation, we built the first floor. Now we have architectural drawings for the next 15 years, and what we’re looking for is a financial sponsor who’s going to fund the next piece of that journey,” Brackney said. “You should be creating a picture for them that says, ‘This is what we need from you.'”
Total postsecondary spring enrollment grew 3.2% year-over-year, according to a report.
The National Student Clearinghouse Research Center published the latest edition of its
The report found that undergraduate enrollment grew 3.5% and reached 15.3 million students, but remains below pre-pandemic levels (378,000 less students). Graduate enrollment also increased to 7.2%, higher than in 2020 (209,000 more students).
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Community colleges saw the largest growth in enrollment (5.4%), and enrollment increased for all undergraduate credential types. Bachelor’s and associate programs grew 2.1% and 6.3%, respectively, but remain below pre-pandemic levels.
Most ethnoracial groups saw increases in enrollment this spring, with Black and multiracial undergraduate students seeing the largest growth (10.3% and 8.5%, respectively). The number of undergraduate students in their twenties also increased. Enrollment of students between the ages of 21 and 24 grew 3.2%, and enrollment for students between 25 and 29 grew 5.9%.
For the third consecutive year, high vocational public two-years had substantial growth in enrollment, increasing 11.7% from 2023 to 2024. Enrollment at these trade-focused institutions have increased nearly 20% since pre-pandemic levels.
Jordan Vonderhaar/Photographer: Jordan Vonderhaar/
The Internal Revenue Service has released
The Inflation Reduction Act of 2022 amended Sec. 55 to impose the CAMT based on the “adjusted financial statement income” of an “applicable corporation” for taxable years beginning in 2023.
Among other details, proposed regs provide that “applicable corporation” means any corporation (other than an S corp, a regulated investment company or a REIT) that meets either of two average annual AFSI tests depending on financial statement net operating losses for three taxable years and whether the corporation is a member of a foreign-parented multinational group.
Prior to the publication of any final regulations relating to the CAMT, the Treasury and the IRS will issue a notice of proposed rulemaking. Notice 2025-27 will be in IRB: 2025-26, dated June 23.
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