opportunity or threat? it depends.
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with rick telberg
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private equity takeovers of accounting firms are changing the rules for the cpa business, impacting succession plans, shifting talent strategies, and reshaping the competition, according to robert fligel, ceo and founder of rf resources, one of the nation’s leading advisors.
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in this exclusive interview with 卡塔尔世界杯常规比赛时间, fligel, a veteran dealmaker in the vast and active new york market, explains what pe firms may not want you to know, why cpa firms are suddenly so much in demand, and the often-uncertain outlook for owners, staffers, and the profession.
for some, pe is an opportunity. for others, a threat. fligel helps sort it all out.
private equity takeovers are not business as usual, no matter what they say in their news releases. pe represents the biggest disruption in the m&a market for cpa firms in memory.
for staffers, a pe takeover creates uncertainty and an urge to change jobs. and it’s prompting more younger professionals to look into forming new firms of their own.
six more key takeaways from robert fligel
- what to expect: more mega-mergers and a new round of growth by acquisition — acquisition of non-cpa firms.
- which firms should be investing now to sell to pe in the future?
- how to vet potential pe buyers.
- why options are narrowing for smaller firms.
- what’s an entrepreneurial 40-something accountant to do in this market?
- when’s the right time to seek the counsel of a broker or recruiter?
more about robert fligel
robert fligel, founder and ceo of rf-resources, has experienced accounting from many angles. a university of north carolina graduate at chapel hill, robert began his accounting career providing audit and tax services at a new york city cpa firm. then, he became an audit manager at a fortune 500 firm, an associate at a national search and recruiting firm, and director of human resources for a “big 4” accounting firm.
in his first go-round at entrepreneurship, robert co-founded one of new york’s largest and most successful executive search firms. in 2004, he launched rf resources. he is an active member of the new york state society of cpas, the national conference of cpa practitioners, and other professional organizations.
throughout his career, robert has placed countless partners and senior professionals in cpa firms, fortune 500 and privately held companies, and consulted on numerous firm mergers and acquisitions.
transcript
(transcripts are made available as soon as possible. however, they are not fully edited for grammar or spelling.)
rick telberg, 卡塔尔世界杯常规比赛时间
i’m rick telberg, 卡塔尔世界杯常规比赛时间. thanks for joining us today. our guest today is robert fligel, founder and ceo of rf resources, the most active broker for mergers and acquisitions and executive search for accounting firms in the most dynamic market in the world, new york city. what we learn about trends in the business in new york city extend across the country and around the world. robert, in particular, is probably the best-connected person to talk about mergers and acquisitions and executive search in the new york area. robert, the first question is about private equity. what does private equity mean to the accounting profession?
robert fligel, rf-resources 01:14
so, rick, thank you for that introduction. i appreciate that. and i’m glad that is your first question about private equity because i think that is the biggest thing going on in the profession, second to one another, which we’ll discuss later. but the word that comes to mind most definitely is disruptive. it is probably the most disruptive thing that has happened in the profession in my career. and what i mean by that specifically, in a nutshell, is it is flipped the model totally on what happens to partners seeking a buyout. and it has flipped the model entirely on ownership and corporate structure in the accounting firms, coupled with an existing major, major staffing problems, so disruptive, is probably putting it a little bit mildly.
rick telberg, 卡塔尔世界杯常规比赛时间 02:04
how does it affect staffing?
robert fligel, rf-resources 02:06
well, what i know is happening from speaking to people every day, managing partners of all different size firms, and primarily partner and their partner, professionals in the accounting firms is there is a lot more pressure in the firms that have taken private equity, whether it’s more hours more realization, more profitability, reporting to corporate ownership, i think that has put a lot of pressure on the firms from top to bottom, and will definitely affect the continuing staffing shortage in a not good way. in my opinion, private equity affects many firms involved in private equity firms that compete against those involved in private equity. how do you compete against a firm that has taken private equity? okay, i don’t think it’s hard at all. i really do not think it’s hard. and i think some firms i know are doing it, which is you can create your own private equity. by a line of credit, if you don’t have significant debt on your balance sheet, you’re a robust firm, and your current and prior history is strong, you can definitely get significant bank financing or third-party financing and compete very effectively with private equity. i know for a fact that several firms are including a very significant cash component in their m&a deals, and they are not private equity. they are just strong firms that have chosen to stay totally independent and provide the financing and what private equity has done. accounting firms have always been desirous of expanding their advisory services, anything outside of tax and audit, and you cannot buy a good company without putting up some cash. and cpa firms, by nature, take out their cash. so, you need funds to acquire a good company. and that’s where private equity has raised the bar and just created a gigantic, good awareness of the need for capital to grow. and that’s how it’s happening.
rick telberg, 卡塔尔世界杯常规比赛时间 04:27
where did these people come from? what’s their background? and why are they interested in the accounting system?
robert fligel, rf-resources 04:36
now, that’s a great question. and i’ve had numerous conversations with private equity firms. and i can say i’m an expert in it, but it’s a very interesting population. you know, by and large, it is really smart people out of the top schools, generally very young. the founders may be on the older side, perhaps. still, it’s a very smart, aggressive, analytical group focused on profitability, growth, and future liquidity. it’s not a cpa firm. it’s not that colleague and partner meetings or all that stuff. it’s all about return on equity, creating a but creating able to, and it’s just a very different population, and they are high ownership in these accounting firms. and that has to have some significant input in a day-to-day impact.
rick telberg, 卡塔尔世界杯常规比赛时间 06:50
what do you think the economy going forward will do to decision-making when it comes to private equity? will it expose flaws in private equity? will it accelerate the private equity interest? how does a potentially recessionary environment affect this trend?
robert fligel, rf-resources 07:18
well, the pressure on earnings is going to be very steep as it is in the private equity is just all about making money as every other business is, but even maybe more with a sharper edge. and if there is a major recession, and there are businesses that are affected badly in certain industries, and firms go out of business in certain industries or clients with more fee pressure. i think it’s just going to increase the pressure on the partners and the staff to figure out a way to make it up, either through business development. we could see private equity, or not we could see layoffs. we haven’t seen layoffs in the accounting profession in many years. some firms are desperate for people, but that could change, and in private equity is going to put more pressure on the firm than they would put on themselves. i mean, that’s my feeling.
rick telberg, 卡塔尔世界杯常规比赛时间 08:19
how does private equity change how a cpa firm works?
robert fligel, rf-resources 08:33
what they say is that it is business as usual. you run your tax clients or your advisory clients exactly as you always have setting billing rates, hiring, firing, staffing, you name it across the board, you run your business exactly as is. what they don’t say is what is the impact of having a new 40% owner that’s looking for their share of the profits? and what that what that means to the existing partner and staff group. that, to me, is the big unknown why the jury is very much out
rick telberg, 卡塔尔世界杯常规比赛时间 09:07
below the partner level, especially senior staffers who are interested in becoming a partner, and how does private equity affect that?
robert fligel, rf-resources 09:23
staffers? i think it’s a very subtle way because, you know, private equity, ownership, and activities really don’t filter down directly to staff and seniors and things like that. but i know for a fact that the partners, the senior partners, and the regular non-senior partners have a lot more pressure on them to produce. there’s reporting there are metrics to be met more and more above what the firm’s already did, which was already significant. good firms have good metrics and good dashboards and all that kind of stuff. so, i think it filters down from the partners to the staff, that the pressure to produce more profitability are more hour’s higher realization. and staff, as everybody knows, are very, very sensitive to the pressure and the hours. and that’s not going to get any better. and private equity only makes it worse.
rick telberg, 卡塔尔世界杯常规比赛时间 10:18
private equity makes the hours and pressure worse on staffers. what do working staffers do about that? what do you see staffers doing about the increased pressure by the private equity brings into a firm?
robert fligel, rf-resources 10:39
well, i think it puts the idea in their minds of making a change. you know, part of the reason there is such a big staffing shortage right now is because the same people exist, the same number of people exists pretty much it’s been around forever, in the firm’s staff, senior manager, etc. but the biggest problem has been, because of the pandemic and other factors, people are not moving. you know, and especially if you’re working remote or hybrid, you know, the pressure of going into the office and having to deal with people you may not want to deal with on a day-to-day basis. and sometimes, in some cases, that pressure is gone. it’s a lot easier, i think, to work remotely than in the office. but our external factors can make somebody think differently that if they’re all of a sudden feeling like this firm is not going the direction i want to go, i want to be in a midsize firm, i want to be in a more entrepreneurial firm, i want to be in a more collaborative, traditional culture, then they will probably leave. so that’s what’s going to happen. it is happening to some extent.
rick telberg, 卡塔尔世界杯常规比赛时间 11:41
it sounds like pressure is building within staff. it’s pent-up pressure, that given the right opportunity or the right economic conditions, could lead to a whole new round of turnover. yeah, it really could.
robert fligel, rf-resources 12:00
and, you know, it’s had an interesting side effect recently. and i hope it i hope it’s a trend for the future because i think it’s great for the profession, younger people wanting to go into their own firm, or younger people wanting to break away from their large firm and acquire a small firm, or a midsize firm because they’re entrepreneurial. i haven’t seen much of that in all my years recently. easily four or five people i’m working with that want to do that. they want to be the buyout strategy for a smaller firm that has a succession issue. i think that’s really positive for the profession, when people spin up and establish their own practice, or even established firms. what is it about private equity that they can apply to their strategies going forward? that private equity does things differently, and thinks different in a different way than traditional cpas or cpa firms? how is it changing? or how could it change? the long-term idea of cpa firms that may not be interested in private equity, but are grinning lessons from how private equity operates? the big message in whether a smaller mid-sized firm wants to deal with it or not as a question mark is growth by acquisition. and i’m not talking about acquisition of accounting firms that’s always in the cards of this is a growth strategy. and i think it’s a wise strategy. but i’m talking about the non-accounting firms, non-attest nontax, getting into the advisory businesses, and smaller to midsize firms don’t really care that much, to be quite honest. you know, it’s great if something fell into their lap, but it’s not their core business. and unless they can acquire a company, which is hard to do, or have an internal champion to start something new. it’s not really going to happen. i think the accounting business is strong as it is. and the younger people that want to either buy a firm or start their own firm will probably be that probably they are quite happy to be in the traditional business. x is in perhaps financial statement work as well. because it is a high level, they’re not looking to do low-level 1040s, obviously, but high-level tax work and tax advisory work is very, very lucrative. how does private equity affect that hot-button issue of mergers, acquisitions? and the question of succession?
robert fligel, rf-resources 15:01
it has really increased the awareness of the need to do something, even if a smaller to midsize firm knows they are not going to qualify for private equity. it’s all the buzz. it’s got firms thinking more and more. and we really have to do something we’ve been sitting on our hands. we know it. we know it. and that’s enough talk already. more firms are raising their hand, saying, we need help. can you help us? and that’s, that’s, that’s part of my job. and what makes it interesting is trying to come up with creative solutions, whether it’s the best fit for that firm to do a modest merger up or to bring in younger partners or a team of people to be the succession plan. that’s what makes it interesting.
rick telberg, 卡塔尔世界杯常规比赛时间 15:44
what’s your best advice to firms that are not interested in private equity but are interested in mergers and acquisitions, and dealing with their succession strategy?
robert fligel, rf-resources 16:02
it may sound a little corny, but the acronym of byob, i don’t mean bring your own bottle. what i mean is be your own banker. and by that, i mean, if you don’t have a lot of debt on your balance sheet, you can definitely get financing. there’s, you know, whether it’s commercial banks or outside financing companies, they exist. and like i said earlier, it’s a really good business. you can get a very good line of credit. and you can use that for m&a or, you know, non-cpa firm type of acquisitions. and staff. i mean, you know, there’s everybody knows salaries are going crazy. you need more money to be more competitive in that market, too. so, you can do it yourself. i really do believe that.
rick telberg, 卡塔尔世界杯常规比赛时间 16:44
how much more m&a activity do you expect?
robert fligel, rf-resources 17:12
i think it’s going to be more, i do think there’s going to be more mega-mergers and more mega private equity deals, where it all goes, nobody really knows. but the pace of mergers is going to go high. you know, there are different sweet spots in the market. i think the smaller firms net two to 10, or two to $20 million range that have succession issues, they really need a lot of help. and i really enjoy working with firms that size because they can use the help and appreciate it. and on the other side, there is significant concern about firms below that level. because there are some good firms out there with specialties, and they make good money, and they’re incredibly nice people. but if a firm doesn’t have young partners, or young staff, or younger stanford partners, no matter how specialized they are in the niches they have in the profitability, they’re not of high interest to the firms that are buyers. so that’s an ongoing issue out in the profession right now. but to answer your question, the pace of activity is going to continue to be very high.
rick telberg, 卡塔尔世界杯常规比赛时间 18:23
and what about valuations? are prices for accounting firms going up, going down, or going sideways?
robert fligel, rf-resources 18:31
they’re stable, but they have gone down considerably over the past five years, i mean, no multiples, to use that word of 1.5 or even more, were not unusual five or eight years ago. that really doesn’t happen now. but it’s really based on the desire of the firm and what the market demands. and i’m a big believer in blended rates. a firm may want to may be willing to pay a much higher price for the high-net-worth tax part of one business and maybe a lot less for the audits and reviews of another practice or another part of the practice and come up with something that rewards the selling firm appropriately for their work in in the right situation. a merger or a merger leading to a buyout, which is more common, should be accretive to the seller and the buyer over time. there are additional services, these going up over time, more resources, more resources to be able to do better work, and certainly technology and things like that.
rick telberg, 卡塔尔世界杯常规比赛时间 19:36
what steps can firms take to improve their potential valuation?
robert fligel, rf-resources 19:44
well, the really hard things the firms do all they can do but probably could do a little bit more which is building up their infrastructure, building up their team, by bringing in more people way, more qualified people more of a farm, you know, farm team type of approach from colleges and interns and things like that. because it really is all about the people. and even the firms that are really good and have all the right things in place. accounting firms really don’t do a great job marketing themselves. i don’t mean marketing with websites and brochures and all that kind of stuff. i mean, in the in the m&a process, i think there’s a lot to be said for packaging your firm – to use a word – of having everything all together. why the firm is a great firm to consider acquiring or merging with bios of the people highlighting the specialties, highlighting the accomplishments, highlighting the highlighting the relationships, you know, accounting firms didn’t get to be so profitable for the reason that the services are needed. when you think about it, every accounting firm between all their clients has an incredible wealth of information on each client has attorneys and bankers, and wealth management people. and those relationships can be tapped into in a much more ambitious way than most firms don’t have time. they don’t have time to cultivate that. so, the opportunity is huge, i think, for growth, for firms that want to increase the valuation that understand that they need to do these things. and they’re also interested in a return on their investment if it isn’t worth it for the typical accounting firm to make the investment and improve its valuation.
rick telberg, 卡塔尔世界杯常规比赛时间 21:53
and is it worth the wait for the results to come in? in other words, it takes money to invest in a firm to improve its valuation. it takes time for the returns on that investment to start coming in. is it worth the time and the money for most firms to do that? or should they think about selling now, while the market is hot?
robert fligel, rf-resources 22:28
that’s a great question. i think it’s worth it if they have enough of the pieces already in place, meaning the people, the finances, the client base, and specialties’ profitability. if a lot of those things are lacking, i would say no. they probably should be preparing for a different type of transition merging up perhaps. it’s a tremendous amount of work to do it. and everybody is pretty strapped as it is for time. so, it’s not there. it’s not the core strength of a cpa for a partner to be a great recruiter, or a great, you know, not everybody’s a great business developer. and nobody, and it’s a question of market, do you want to allocate your cash capital to those things that you know, long term will work but short term, you will make less money? big decision to make?
rick telberg, 卡塔尔世界杯常规比赛时间 23:31
are you saying that now is a good time to sell?
robert fligel, rf-resources 23:37
it’s as high as it ever has been on the seller’s side. even more. so, i think, because of the private equity and because of the disruption and everything that’s going on in the profession. it’s very exciting with what’s going on with artificial intelligence and outsourcing and working on a project basis and value billing. and there’s just a lot going on. i’m fascinated personally by things like chat gbt. and if anybody hasn’t, you know, played around with that.
rick telberg, 卡塔尔世界杯常规比赛时间 24:31
you’ve talked about how a seller can really stand out. what about buyers? how do you become a desirable buyer? what’s a desirable buyer look like?
robert fligel, rf-resources 24:45
well, the most desirable buyer is the people that have done successful deals, because they will almost invariably open up the door to a seller saying you can talk to any one of these five or eight or 20 partners that merged in over the years. they’ll tell you what their process was like and why this is a good firm to merge into. but if you’ve not done m&a deals as a buyer, and you want to do them, then you have to make yourself more desirable. and i think that’s by being very active in the profession, whether it’s on the state level or the aicpa level, you know, becoming known in the profession, having the pieces in place that a firm looking to sell would be looking for, which is a robust infrastructure to support growth, an active social media presence, a desirable work location, even though it may be hybrid and never full time necessarily again. and, and creating, almost like i mentioned before, sort of a black book of here’s why we are a desirable firm to merge with. here’s our partner group. here are our industry niches, here’s our external relationships. and here are eight bullet points of why we would be a great firm to consider merging with i think that eliminates the question mark. well, you haven’t done this before. everybody has to start somewhere.
rick telberg, 卡塔尔世界杯常规比赛时间 26:18
what do firms need to know about recruiting and retaining the best talent these days?
robert fligel, rf-resources 26:30
i think it’s well known by everybody in the profession what the firms are doing that are the most progressive at creating happy staff and retaining staff, and being desirable to external candidates, which is all of the family-friendly policies. it’s the remote work, the hybrid options. it’s the flexible hours, its benefit packages. and it’s, i should mention this at the very beginning, the biggest of all, is the work-life balance. and whether you like it or not, that is really important to younger people. and they will work hard when it’s necessary, and they’ll be responsible for getting the work out the door. but the freedom to do it on their schedule is assist is paramount.
rick telberg, 卡塔尔世界杯常规比赛时间 27:36
what drives people to leave? whether you’re a partner or a staffer, what are the red flags or signals going on in your firm that should prompt you to start looking elsewhere?
robert fligel, rf-resources 27:50
well, as a host of things, it can always be the feeling that the staff person does not really like the firm’s direction, whether the firm is just getting too big, and further removed from being the collegial old-time partnership meeting. it could be internal relationships, which i think is less and less of an issue because firms of all different sizes have gotten way better about getting rid of – they use that expression – getting rid of bad people, like whether it’s partners, managers or staff that are just difficult. nobody wants them around. and even if they’re big producers or whatever, it’s, it’s becoming less a little bit less than less of an issue. comp is not the number one factor. it’s a big challenge now because competing firms offer much more money than people might be making. and but most people will just not leave because of money. it’s going to be something more intangible than that. it could be a career path. it could be getting more of a getting to more of a specialty area. and a lot of times, it really comes down to almost always comes down to culture. and one of the big factors is going from bigger firms to smaller ones is much more common than the other way around. because they’re looking for a different experience, a more close-knit group with a little more control over their destiny. so that is definitely always been the case and will continue to be, i think
rick telberg, 卡塔尔世界杯常规比赛时间 29:50
why are options for these smaller firms becoming fewer?
robert fligel, rf-resources 29:59
there’s a shrinking number of buyers just because of the mergers that have happened over the past 10 to 20 years. it’s probably got to be 30 or 50% less midsize firms now than there were ten years ago or 15 years ago. so, the population of buyers is shrinking. and the firms that are active buyers and have done deals or may want to do deals are becoming more and more selective. they really do want the younger quality staff, and some younger partners firm that has 80% of their partners retiring in the next two to five years is just not that desirable. i think everybody, everybody, will find a home. not saying it’s impossible, but they’re just not in high demand. it’s the firms that are better positioned,
rick telberg, 卡塔尔世界杯常规比赛时间 30:55
why the squeeze on midsize firms?
robert fligel, rf-resources 31:02
well, there’s a continuing trend of merger activity, which has been going on for, i would say, at least, probably like 20 years. you know, many years ago, i used to put together a report that a lot of people may have seen called the deal sheet. and i used to report on all the deals that i could get my hands on, whether they were my deals or other people’s deals. and they were in the new york area alone, there could have been 20 to a year of firms merging up. and the reasons are the same as always. the aging partner group and the inability to have enough younger people buy out the older partner. so that is why the number of midsize firms has shrunk dramatically over the years. and by and large, most of the ones that are left are in, i would think, very good shape. they don’t really have to consider a merger or private equity unless they really want to do that because they tend to have enough of a dispersion of the partner group ages that they can create an internal succession plan, which is great.
rick telberg, 卡塔尔世界杯常规比赛时间 32:14
are the bigger firms looking to acquire? are they looking for smaller firms? are they looking for midsize firms? are they looking outside the business?
robert fligel, rf-resources 32:31
well, the really big firms’ private equity diet is always looking outside the business also for related businesses that are not tax or attest-related but can fit into the group. for example, if a firm has a lot of real estate clients, they would love to get there’s plenty of real estate advisory businesses out there, or consulting firms or things like that. so those types of specialties, but the need, the desire, the desire for growth is very intense. and it’s that’s probably a really big challenge with midsize firms growing their business, the traditional business, and growing the advisory business. you really need to have access to capital. and you really do have to… you have to have an internal champion, but almost has to be a partner in charge of growth, which some of the big firms have people exactly with that title. and that’s their job, m&a, seeking out other types of businesses to acquire things like that.
rick telberg, 卡塔尔世界杯常规比赛时间 33:37
you’ve said that firms should be prepared in some very basic ways.
robert fligel, rf-resources 33:44
i guess the best way i can answer that is you have to have a plan and accountability. and that’s, i think, really hard for a lot of people in firms to do, which is a step-by-step outline or bullet points plan of all the different actions you need to take or have to take to be able to accomplish a certain goal with a timeline with accountability, regular status reports. and there just has to be that serious level of commitment. and it really starts at the top. i mean, the firms i work with, and there’s a number of them that are extremely successful, growing incredibly well organically, and the margins and things like that, they have created a culture, they talk about it all the time. they have a real plan and mission, and they’re executing it. maybe they probably make a little bit less money in the short term. but the results will speak for themselves over time.
rick telberg, 卡塔尔世界杯常规比赛时间 35:18
at what point? when should a firm get professional advice?
robert fligel, rf-resources 35:36
as early as possible, plenty of consultants in the business, like myself and others, can advise on a day-to-day basis. the planning process for considering succession planning definitely engage an attorney and, ideally, one that has got a lot of familiarity with the accounting industry. and you know, being active in the profession isn’t another big part of it, which i’ve mentioned, just a lot of people poopoo spending time with the professional groups. and that’s where you meet a lot of people as well. and i’d say a lot of these transactions happen without people like me involved where they met somebody else, or they know them from their hometown or something. and you have to you have to be out there to be in the game.
rick telberg, 卡塔尔世界杯常规比赛时间 36:26
everybody’s talking about private equity. we’ve been there before. why is this time different?
robert fligel, rf-resources 36:39
i think that organically it has just become more pervasive. in other words, once a few private equity firms started focusing on the accounting profession, now there’s a lot of them focused on the accounting profession. these firms are in new york and chicago and the west coast, and florida. there are private equity firms everywhere. and a lot of them have put accounting firms on their radar screen. so that’s what’s different about the past. but i do think the jury is still out in a big way. how is it going to play out because of the corporate ownership, the alternative structure, will the incentive stock options, or incentives for the non-founding partners? and for the staff? all the talk about the great upside in future liquidity events? will it all happen? nobody knows the answer to that question. and i think it’s too early to tell if i was a cpa firm with a great practice and big enough to be of interest to the private equity companies. my thought process would be i recently checked out electric cars with my wife, and i got really, really intrigued with them. but they were the coolest thing. really fast, really quiet. and i was really ready to, like, sign on the dotted line. and then i decided, you know what, i think it’s too early. i think i think it’s like two or three years too early. so, i’m going to wait and see if this green movement and impetus to get rid of fossil fuels and all that, what happens with all that and see what happens. so that’s how i kind of feel about private equity. it means great right now for the founding partners in terms of liquidity. it could be very good for the firm, but i think it’s too soon to tell.
rick telberg, 卡塔尔世界杯常规比赛时间 38:29
some 20 and 30 years ago, we lived through acquisitions by american express, h&r block, mayer hoffman mccann. what went wrong? why didn’t that trend continue?
robert fligel, rf-resources 38:57
from what i understand, i believe the cultures just did not mesh. and the expectations did not come to pass. why? returning to your question, why will this time be different? one thing i see that happens that will be great, but i don’t know if it’s going to happen or not, which is the private equities. on the one hand, hands off on the day-to-day operations, set your building rates, do your hiring and firing, and run your business like you always did. but besides having an open checkbook for acquisitions, which is nice, the idea of helping the businesses, and from my conversations, they talk about it. i don’t know that they have the expertise to do that. in other words, for a firm that’s not already highly engaged in augmenting staffing by outsourcing or having an office in india or the philippines or vietnam or whatever. or are adopting artificial intelligence for compliance tax compliance specialty. i don’t know that they’re equipped, or have the time, interest, or desire to be the private equity professionals to get actively involved in helping the firms grow in those areas, i still think it’s going to be up to the firm’s themselves, and some will be able to do it, and some won’t, i don’t think private equity is going to have much of a difference there.
rick telberg, 卡塔尔世界杯常规比赛时间 40:26
how does corporate ownership affect the corporate culture and the sharing of profits and private equity deals?
robert fligel, rf-resources 40:36
it puts pressure on the profitability because as a 40, or 50%, owner of the advisory and tax side of the business, they will expect that they will be getting a very significant return on their investment. and that means less profits for everybody else. so, they have to make that up somewhere. part of it, they make up on what is well known in the private equity world in the accounting world as the scrape on partner compensation. the top equity partners’ founding partners will substantially reduce their pay to create the ebita for the cash at closing. i think there are. i think there’s pressure on profitability. and that kind of goes back to what we talked about at the beginning of the feeling of pressure on the other partners and the staff group pressure to produce kind of filtering down because it is limited. it’s a limited pot of money to share.
rick telberg, 卡塔尔世界杯常规比赛时间 41:42
what do you think people don’t really understand about private equity deals? how does a deal work? what are the terms?
robert fligel, rf-resources 41:55
typically, they are the founding partners and the senior equity partners usually get 40 to 50, or maybe even higher, percent of their deferred comp at the closing. they do take less compensation going forward for the remaining years they work. and there are various incentives for the rest of the partners that aren’t getting the big bucks. so, to say, at the closing, and the staff in terms of incentive options, stock options, formulas based on the growth of the practice, from the time private equity comes in, you know, every annually or six months or whatever, based on the growth of the business. so, there are a lot of incentives. and there’s the talk of the next liquidity event because that is the essence of private equity, which is the five to seven-year hold period, do what you can to help grow the business, build it up as much as you can. and then the idea is, they’re going to monetize it by selling it to another business. and that other business could be a larger accounting firm, or a non-accounting firm. and to me, that is also one of the major, major question marks about private equity. nobody knows what that’s going to look like and how that’s going to play out. if everybody makes millions, maybe everybody will be happy. but i always believe money doesn’t buy happiness necessarily. so that’s kind of remains to be seen. and, you know, you will find yourself working for another company and five to seven years. who is that going to be? nobody knows. and nobody knows whether it’ll be good or bad. so that uncertainty puts pressure on the staff and the staffing because, you know, some people might be very excited by it and say, let me give it a year or two and see what happens. and others may go, you know what? this is not the direction i want to go. i want to go back to my original roots in a smaller to midsize firm, where i’ll be a bigger fish and go in that direction. so, a lot of unknowns.
rick telberg, 卡塔尔世界杯常规比赛时间 44:02
you say partners get the big bucks. so, there are there in on the deal. but staffers aren’t part of the deal. how does the deal affect staffers?
robert fligel, rf-resources 44:21
well, you know, people conjure up in their minds what’s really happening, and rumors are flying around about this partner getting this much money. this partner got that much money, and the firms, i’m quite sure, are doing. i know they’re doing town hall meetings, communicating extremely openly as much as possible about the new partner, the private equity deal, the alternative structure, and the incentives going forward—the growth projections. you know, the private equity firms and the cpa firms are doing a very good job of articulating. in addition to the staff, it’s unknown and new, and for most people, there’s always a certain degree of fear of change that we all have. and that uncertainty could lead people to think, you know, maybe this is not the right situation for me, potentially.
rick telberg, 卡塔尔世界杯常规比赛时间 45:18
what should a staffer be considering when they’re considering their career plans? first, let’s consider the most marketable staffers. then, the most senior staffers, how should they be considering their career plans these days? in light of all the changes in accounting, how does a 40-something staffer look for a good solid future?
robert fligel, rf-resources 46:35
working with that staffer, whether a new partner, senior manager, director, principal, or whatever, is one of my greatest pleasures. that professional is passionate about public accounting, loves what they do, wants to make a career, and isn’t sure where they are in the right place. this has got nothing to do with private equity or non-private equity in most cases. but as a longtime in the profession, and a former practicing cpa myself, i love those conversations and those type of counseling and consulting because, you know, i can talk very openly, honestly, from firsthand experience, about the benefits of big firms to midsize firms and small firms and guide that person appropriately. and there’s, i think, a lot of misconception because people come out of college. it’s a whole different discussion. but in college, for the most part. accounting majors hear a lot about the big for the national firms and other consulting companies. they don’t hear much about small to midsize firms. then they come out of college, and they get turned off from the profession, sometimes because the big firms may not be the best place to be like the work. and there’s a whole other world of small and mid-sized firms. and sometimes they learn about them from friends and people like me. but i do like the role of being their advisor in that sense. let’s say i’m a 40-something staffer not interested in becoming a partner at the firm. now, when we learn other, i like to go out and be my boss. i want to start my firm. i’ve got a pretty good book of business. i’m not going to steal clients, but my, my clients, no, no clients, yet. i’ve got a pretty good network.
rick telberg, 卡塔尔世界杯常规比赛时间 48:54
if i’m a 40-something staffer, how do i go out on my own? and start my own practice to start with an acquisition? or do i just hang up a shingle?
robert fligel, rf-resources 49:09
you certainly can’t hang up a shingle unless you have enough capital to support yourself for several years. because if you don’t have a book of business, well, that person is probably earning. now, to be specific, is probably earning between 150 and 250, depending on the firm size and their level and so forth. and they’re probably on the younger side. they may have a spouse, and they may have children, or they may have a mortgage, and if they’re living in new york, which is where we are not a cheap place to live. so, if you’re going to hang up a shingle, you’ve got to have half a million dollars in business or better for sure and be able to live on that. it’s very hard to grow a practice. i’m sure nobody would disagree with one time, one client, or time that will take a very long time. and unless you’re willing to accept a more modest lifestyle, not the way people want to go. so, to answer your question, i’m working with people like that currently, one in particular. and that has enough to hang out a shingle if they want to. they haven’t done it yet. but they’re very, very focused on acquiring smaller firms, one or two partner firms that don’t have a succession plan. and that is the way to grow to a certain point. and then, after a while, they may keep on making acquisitions, or it may just feed on itself where clients continually refer new business and because merging in practices is not easy at all, is a whole cultural aspect of it, and merging and fitting it all, melding them all together. there are definitely more entrepreneurial cpas that i’m hearing about these days. it’s really being able to articulate the plan, like their current business, being able to describe it in very clear terms, have good metrics about that, have a vision of what they want to do, what niches they want to get into, and what niches they want to grow out, they’re going to do that being active, like in trade associations, or networking, things like that. it’s really having a plan. and they really do need to work with people like me. i’m not the only one that does this. but, you know, it’s like, not a good thing to say these days because of the weight, the weight or the feeling about banks. but if you want money, you go to the bank. if you want to know about cpa firms that might be available for sale, you go to somebody who knows those kinds of firms. that’s people like me. so, i think it’s very hard to do on your own. you can, i mean, that young person, or that entrepreneurial cpa, can go to tons of new york state society or nccpap meetings, breakfast meetings, networking, meetings, technical meetings, and you can meet a lot of these practitioners that way. but you still have to establish a relationship with them. they’re not going to volunteer just by saying hello, oh, by the way, you know, you look young, you might be interested in buying my business doesn’t happen that way. it does have to happen organically.
rick telberg, 卡塔尔世界杯常规比赛时间 53:18
how can an outside facilitator help that entrepreneurial accountant find the right practice to buy?
robert fligel, rf-resources 53:44
i can only talk about how i go about doing things like that, which is similar to working with people on the recruiting and staffing side, which is very much understanding what they’ve done, what they’ve accomplished, what they want to do, what they bring to the table, and what’s important to them, which varies from person to person. and then, based on my knowledge, which is, over many, many years now, of the accounting firms, small, medium, and large, and the geographic areas and the specialties, which one, two, or three might make sense to be a prospect. and i go about making those introductions. and i am their guide through the whole process, whether on the headhunting or recruiting side or the m&a side, i go to as many meetings, if not all the meetings, so that i’m very involved in the process. i just happen to take incredibly seriously, as i should. but you know, it’s a process, and that’s just that’s kind of what i do for a living. it’s working.
rick telberg, 卡塔尔世界杯常规比赛时间 54:57
what is your process? how do you first make contact with somebody? and how can they expect to work with you?
robert fligel, rf-resources 55:30
well, most people that i work with, whether it’s firms looking to merge or sell, are people looking to acquire practices and looking to change jobs. i would say, my professional life 90% of it is referral based, where somebody calls and goes, i got your name from so and so. and you helped me and then go about understanding what they do and what they’re looking for, and, and go through that process with them. and i have, over the years, refined how i do things, and even provide them a roadmap, meaning a written document of, here are the different steps we’re going to go through together, make sure we’re kind of in sync about that, and have a clear understanding about it. and it’s a major deal to change jobs, to buy a firm, to sell a firm, merge with another firm, and it’s life-changing. and, it takes a lot of a lot of time and attention. but i’ve been really happy to love what i do. and i love the public accounting profession. so, it’s not work. it’s just something i like to do.
rick telberg, 卡塔尔世界杯常规比赛时间 56:43
robert, what can firms do, on the staffing side, to improve recruiting and retention?
robert fligel, rf-resources 56:51
there are several specific ideas i have shared with many firms that i will share with you today. that can help because there’s no simple solution. it’s a finite group of people, and its relationship based. but what confirms do on the recruiting side to maximize their chances? here are several things. one is having good relationships with outside recruiters. most firms have outside recruiters. they have their go-to people, whether one, two, or three different firms. but those relationships, to be effective, have to be cultivated. an outside recruiter is not going to give you that much attention. if you are a small firm, let’s say and hire one person a year or two people a year, or very infrequently. they’re going to give their attention to the firms that hire 10 or 20, or 30 people a year. how do you get their attention? for one, it’s by building the relationship. so, i believe in the concept of meeting the recruiter, even if you’ve met them before, which a lot of people have never met, meet them in person, talk about old school, invite them to your office, go to their office, meet them talk about why your firm’s a great place to work, why young people or white people, in general, should consider your firm and engage the owners. and if you can, ideally, engage the day-to-day recruiters that are going to be on the phone trying to recruit people or other firms. and you want to be at the top of the list. and the relationship is number one. number two is kind of put your money where your mouth is. i’m a big believer and offering premium fees for short periods. if the normal recruiting fee is 20%, offer 30% or even 35% for a limited period of time, maybe it’s 30 days, maybe it’s 60 days, whatever it is, get their attention financially and make it more desirable if they can direct people that are interested in a firm like yours to them. and you can protect yourself on the downside with payment terms, guarantee periods, etc. the third thing is offering very high internal rewards to your people. if somebody refers a candidate, that if you hired it through an outside recruiter, you’re going to pay a $50,000 fee for, in my humble opinion, what’s the big deal about giving your internal person ten or $15,000 if they recommend somebody? typically, you don’t pay it on day one. you might pay it 60 days after the person starts to make sure everybody’s happy. but those are just three very quick ideas of how to do that. and i guess part b of that, that the firm’s i don’t think most can do themselves, is social media. it’s just the way to go. and i think you can find a firm that can create a social media platform for your form for recruiting. so, you’re all over instagram, facebook, linkedin, google reviews, and search engine optimization. you’ve really got to do all those things.
rick telberg, 卡塔尔世界杯常规比赛时间 1:00:10
robert, thank you. it never hurts to talk.
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