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one of the trends that is already happening is firms are moving from the partnership model to a more corporate model with respect to ownership and owner compensation. this means compensation systems will include elements of ownership as part of the currency. it also means the concept that a professional is expected to commit to a full career with a firm with the reward being in the form of a 10-year deferred compensation buyout after 30 years of service is likely to start to wane.
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\nthat doesn\u2019t mean a long-term commitment to the firm won\u2019t continue to be welcome and rewarded. but it does mean an all-or-nothing approach with a weak long-term incentive may not be adequate to retain the top talent firms need.<\/p>\n

i also predict the emergence of an increasing number of non-cpa firms offering niche services in competition with traditional cpa firms. they are already identifying specific service lines that they can exploit with new service delivery, pricing and specialization to compete with cpa firms offering a general mix of services. this is especially the case with client accounting services (cas).<\/p>\n

i see firms reorganizing themselves to better match up service delivery, ownership, compensation and enterprise value with niche advisory services. an example is wealth management, which for a long time has been operated by most firms in a separate unit with dedicated professionals while still maintaining a strong connection to the sponsoring cpa firm. this trend will continue into most of the rest of the service lines other than tax compliance, accounting and attest.<\/p>\n

private equity firms, as well as other strategic investors including wealth management and family offices, continue to dominate the marketplace for m&a. many traditional firms that have historically relied on m&a as a significant growth strategy have resigned themselves to the fact that they will have difficulty competing with pe on many acquisition opportunities. whereas there are about a dozen well-known pe firms that have acquired and are operating accounting firms, there are two to three times that many seeking to enter the market. i think it\u2019s fair to characterize the current market as a feeding frenzy within pe.<\/p>\n

valuations within pe-backed deals are rapidly increasing within certain segments of the market as pe firms try to compete for coveted opportunities. however, even outside of the pe market, the expectation for stronger valuations and a more lucrative deal structure is emerging. there is an understanding within much of the profession that the traditional approach, especially with acquisitions, requires the seller to leave a lot of value on the table. on the buy side, some of the traditional buyers are adjusting to different deal structures in response to these heightened expectations. even though many are resigned to pass on participating in many opportunities, firms are starting to understand capital is a tool they will have to use if they want to compete in m&a.<\/p>\n

lack of labor resources continues to be the no. 1 issue facing firms. many firms seeking a sale or upstream merger often do so to combine with firms better equipped to acquire talent in addition to financial considerations. overseas labor pools are becoming almost a must-have for even smaller midsized firms. professional talent located in the traditional markets of india and the philippines is being augmented by labor located in africa, eastern europe and south america.<\/p>\n

firms, especially those located in the largest metro areas, are struggling with balancing the need to provide staff with remote work environments and maintaining a physical office environment. i constantly hear managing partners talk about an office equipped for 75 to 100 people that might routinely only have a dozen on site. it\u2019s obvious remote work is here to stay. we are seeing an increasing number of firms that are 100 percent virtual now, usually niche firms. the long-term impact on developing next-gen leaders is yet to be determined.<\/p>\n","protected":false},"excerpt":{"rendered":"