{"id":103288,"date":"2022-12-14t11:57:56","date_gmt":"2022-12-14t16:57:56","guid":{"rendered":"\/\/www.g005e.com\/?p=103288"},"modified":"2024-08-07t23:10:06","modified_gmt":"2024-08-08t03:10:06","slug":"outlook-2023-recruiting-requires-flexibility-aggressive-compensation","status":"publish","type":"post","link":"\/\/www.g005e.com\/2022\/12\/14\/outlook-2023-recruiting-requires-flexibility-aggressive-compensation\/","title":{"rendered":"outlook 2023: private equity pumps up paychecks"},"content":{"rendered":"

\"\"<\/a>private equity is affecting even non-pe deals.<\/strong><\/p>\n

by terry putney<\/i>
\nthe rosenberg map survey: national study of cpa firm statistics<\/i><\/a><\/p>\n

the profession as a whole has a significant problem attracting college graduates. the 150-hour requirement coupled with non-competitive compensation compared to finance degrees, as an example, is causing enrollment in accounting programs to drop and graduates to choose alternative careers.<\/p>\n

more:<\/b> outlook 2023: tech automation takes hold<\/a> | irs hires will add pressures<\/a> | look who\u2019s making money now<\/a> | capacity strategies drive change<\/a> | top five trends<\/a> | compensation gets creative<\/a> | the office is over<\/a> | accounting firms face up to private equity<\/a>
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until the profession addresses these issues, firms are going to find it hard to recruit enough talent. we predict the use of alternative sources of talent, such as offshore, will continue to grow in response to this challenge.
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\nfirms that are in markets with lower cost of living, and therefore, lower compensation levels for staff are likely to see more poaching from higher compensation markets.<\/p>\n

we continue to encourage our clients to consider more aggressive compensation and flexibility for staff to retain and attract talent. it is unlikely that all staff want to be remote nor be office-based. most want the flexibility to be both or either.<\/p>\n

we expect a handful of new private equity-backed firms to emerge in the next 12 to 18 months. the effect on traditional business models so far has not been dramatic. however, pe-backed firms are in a much stronger position to drive growth because of the access to capital, especially in advisory services. we expect m&a deal structure for midsized to larger firms will be affected, even those outside of pe-backed deals.<\/p>\n

firms that offer a strategic opportunity because of industry concentrations and niche expertise are likely to see much stronger offers for a merger or acquisition. on the other hand, firms with strictly a traditional tax and accounting practice are seeing a decline in interest from larger firms. however, we do expect a new batch of non-accounting firm buyers to emerge as a solution for traditional tax and accounting practices. these non-traditional buyers are using technology and alternative staffing models to create better efficiency in the service delivery. the traditional small-business and individual clients that smaller firms have are what they target.<\/p>\n

overall, in the m&a world for accounting firms, the level of activity has ramped up significantly. firms that have a need that an upstream merger or sale can solve have come out from the covid-19 haze the last two years ready to pursue solutions. firms looking for growth through m&a continue to use this tried-and-true method of accelerating growth.<\/p>\n

we have seen firms take to heart the need to diversify their service offerings with an emphasis on non-compliance-based services. cas (client accounting services) has exploded and is playing a significant role in many firms\u2019 offerings as well as a rising in-demand niche for acquiring firms. firms are facing a lot of challenges with adapting and implementing new technologies.<\/p>\n

most of the firms we work with realize they can\u2019t be left behind with obsolete technology. the covid-19 pandemic forced many practices lagging in technology to install and upgrade their it to remain functioning via a remote workforce.<\/p>\n

firms pursuing growth through m&a are increasingly passing on acquiring general tax and accounting practices and practices that can\u2019t deliver staff and potential partner \u201cbenches\u201d to replace retiring owners. the larger firms are not, for the most part, just chasing volume with their mergers. they are much more targeted, looking for niches such as cybersecurity, it management and family office; staff expertise; and geographically attractive expansion into both new and existing markets.<\/p>\n

as of this writing there are four major private equity-backed firms and we expect to see several more before the end of 2022. the pe-backed firms are using their newly available capital to drastically alter the way they structure their acquisitions. we are starting to see that approach affect the structure of deals done by firms that are not pe-backed as well. for example, we have learned of several top 20 firms securing significant lines of credit to compete with pe in terms of m&a offers.<\/p>\n

far and away, the number one struggle firms have is staffing. most of the firms we work with don\u2019t have a good handle on this issue. the ones that do have made significant changes in the way they attract and retain talent. we have seen four primary approaches:<\/p>\n