eisneramper gets private equity backing<\/a><\/p><\/blockquote>\n“embrace change. disruption is coming to the profession. be ready for it. build a platform that keeps you sustainable, relevant, and important,” he tells 卡塔尔世界杯常规比赛时间 in this exclusive video interview with editor rick telberg.<\/p>\n
to be sure, the tax, accounting, and bookkeeping sector has been no stranger to wall street funding. pilot bookkeeping, a jeff bezos project, is valued at $1.2 billion. botkeeper affiliate benchmark cloud accounting just landed $5 million in seed capital. but cpa firms are a different animal, with cultural, structural, and regulatory complexities all their own.<\/p>\n
the eisner deal, weinstein says, “really all began to crystallize last year. three private equity sponsors independently reached out to us, and we had serious conversations with all three. we had offers from two, and towerbrook was just far and away the best partner for us, and it all sort of crystallized from there. so you might say it’s been in the works in some way, shape, or form for a couple of decades.”<\/p>\n
why will this deal work when so many previously have fallen short?<\/p>\n
“for me, there are some differentiators here,” weinstein says. “the partners retain a significant investment in the business. so we’re highly motivated to grow and build the business. we share a compensation incentive by outperforming targets, that partners’ compensation gets rewarded.<\/p>\n
“we have the ability for — i’ll call it recycling our ownership percentage,” he continues. “so we’ll still have normal retirements among partners, but when partners retire, we bring that stock back into the business, and then we put that back out to our younger partners, our lateral partners joining us, our partners growing into leadership positions. so by constantly being able to keep that ownership percentage at a very high level across the board, we’ve created a tremendous incentive to continue to grow the firm and to build a business of great value.”<\/p>\n
but how do you meet the expectations of a private equity investor with a cpa firm business? “so here’s an interesting way that we look at it,” weinstein says. “our technology budget… last year, we did about $450 million of revenues. this year we’re on track for over $500 million of revenues, so obviously super-strong growth in there. our technology budget last year was $26 million, and so that is a substantial amount of investment to make back in technology. this year, our technology budget will be over $32 million. and so investing all that capital back into building efficiencies into the way we work, building automation into the way we work, taking out some of the mundane, routine tasks that our professionals do, building more quality into our system, both on the attest side, on the tax side, our outsourcing practice. and so being able to build and deploy technology even quicker, that’s going to drive a lot of margin expansion.<\/p>\n
we have over 300 colleagues in our offices in mumbai, bangalore, and we have a global staffing strategy. and our colleagues in mumbai and bangalore, they’re directly part of our client service teams, and so we have this right-shoring and global staffing perspective that firms that join us as we grow will build that even higher. so we think that we have great margin opportunities there.<\/p>\n
and as we all know, adding more services and more capabilities to our team creates stickier clients. we’ve already got an nps score that’s at 87, which is pretty strong, and creating even stickier client relationships, that helps drive margin as well. if you provide value to your clients, you’ll add margin to your firm.”<\/p>\n
transcript<\/h3>\n transcripts of our episodes are made available as soon as possible. they are not fully edited for grammar or spelling.<\/em><\/p>\nrick telberg<\/strong><\/p>\nmy name is rick telberg for 卡塔尔世界杯常规比赛时间, and i’m here today with charlie weinstein of eisneramper. eisner just closed a big deal with towerbrook private equity to take the advisory services into a new realm and spin off the attest function. charly weinstein, how did this deal happen?<\/p>\n
charly weinstein<\/strong><\/p>\nrick, it’s good to be with you. how did this deal happen? well, a tremendous amount of thought and effort went into deciding whether this was the right thing to do for our firm, whether this was going to be the right thing to do from the profession’s perspective, and then with a great partner in towerbrook, we put our heads together and we built a better mousetrap. we really built a better mousetrap, and this is really an exciting time for the firm, and perhaps transformative for the profession.<\/p>\n
rick telberg<\/strong><\/p>\nwhen did the idea first come to you?<\/p>\n
charly weinstein<\/strong><\/p>\nthe year 2000. and so if you go back and you trace the history of capital, not necessarily private equity but capital coming to the profession, you go all the way back to the days of american express and goldstein golub and kestler, and you track that through cbiz, and uhy, and centerprise. and so we had conversations as early as 2000, and then again in 2012, we had more serious conversations with a private equity sponsor, and then had an interest in learning more about how we could deploy capital to help the firm grow. and then from 2014, we really got serious… sorry, 2012.<\/p>\n
we really got serious in 2016. we had our whole partner group together for a three-day advance. we never retreat, so instead of having a partner retreat, we had a partner advance. and we got together for three days, and we talked about disruption coming to the profession. and we talked about what technology is going to mean for how we do our work, and the types of services we’re going to offer, and how it’s going to impact our clients. we spent three days talking about disruption and thinking about one thing. how do we get comfortable with the uncomfortable? and so 2016 created a mindset amongst our partner group that our firm was ripe for change and for innovation.<\/p>\n
and then we had a very serious reach-out to us in 2018 about private equity. we got very far into the discussion. it didn’t move forward. we went to the partners and talked about it with the partners. it planted a seed, and then for us, it really all began to crystallize last year. three private equity sponsors independently reached out to us, and we had serious conversations with all three. we had offers from two, and towerbrook was just far and away the best partner for us, and it all sort of crystallized from there. so you might say it’s been in the works in some way, shape, or form for a couple of decades.<\/p>\n
rick telberg<\/strong><\/p>\nit’s practically in your dna.<\/p>\n
charly weinstein<\/strong><\/p>\nyeah, and this has been discussed with the partners. really 2016 was the first time that we just decided that as a firm we were going to embrace change.<\/p>\n
rick telberg<\/strong><\/p>\nwhat is it about this moment that makes it the right moment?<\/p>\n
charly weinstein<\/strong><\/p>\ndisruption is here. we see how technology is creating a whole new marketplace for us. we use three words at the firm when we talk about our firm and our goals. we use the words sustainable, relevant, and important. and for us, we always define sustainable as anticipating and meeting the changing needs of our clients. and as we thought about it a little bit more, sustainable really morphed into anticipating and meeting the changing needs of our changing clients. so our clients themselves are changing. they need different services and capabilities from us, our existing clients, and our new clients for the future are going to be different as well.<\/p>\n
and so we thought, “what gives us the best opportunity to compete? what gives us the best opportunity to be sustainable, relevant, and important in the markets we serve?” and capital is one of those key things. when you have change and disruption in a profession, in an industry, you need to be able to deploy capital. and so we thought the timing for this was perfect.<\/p>\n
rick telberg<\/strong><\/p>\nyou talk in terms of the deal being a reimagining the traditional accounting firm model and a positive disrupter for the profession. can you explain some of that?<\/p>\n
charly weinstein<\/strong><\/p>\nthe people in the profession and coming into the profession are changing in a meaningful way. and so my own story, i was with a firm right out of school for about a year, and then i was almost 10 years with a firm called mann judd landau. i’ve been with the firm for now 31, almost 32 years, today eisner and company, which is now eisneramper. and that was the model for many years. people would commit to a firm and be at a firm for a long time.<\/p>\n
today’s generations are very, very different. and for someone to be engaged with the same firm for so long, they have to be able to participate in the growth of the firm. they have to have individual growth opportunities, and they have to be challenged on a regular basis. and so because the ownership model, our ownership model is different, we can have more people participate in what i’ll call value creation. so as the value of the firm grows, our people don’t have to wait until they’re 65, and they retire, and then they get a retirement component when they’re 65 paid over 10 years, as is typical for the profession, without interest.<\/p>\n
and so the ownership model, and private equity, and creating value, and monetizing some aspects of our business, we think that’ll be appealing to the next generation, and to this generation actually, who would rather not stick around for 30 years with the same firm and then be able to see the fruits of their labor. and so we think it’s going to be a real plus in terms of our ability to attract the best talent.<\/p>\n
and the other thing around that is we all know the services that cpa firms have been offering have diversified over the years. less than a third of our revenues now our based on attest, and so that means two-thirds of our revenues are non-attest revenues. and when we compete for talent in the marketplace, we’re not just competing with cpa firms. we’re competing with other businesses, and we think our ownership structure and our ownership model now gives us the opportunity to better compete with other businesses outside the traditional cpa firm model.<\/p>\n
rick telberg<\/strong><\/p>\nwhat kind of phone calls have you received from other top 20 cpa firms’ ceos?<\/p>\n
charly weinstein<\/strong><\/p>\na lot. phone calls, and emails, discussions, people asking the same questions that you’re asking today. people who are very interested in understanding if this is a paradigm shift for the profession, if this is truly transformational across the profession. what have we built into our model that we think is going to be more successful? i did watch your interview with tom and with tony, and it was very interesting. they talked about a lot what didn’t work in the past, and as i said when we first started, i think we’ve built a better mousetrap, and i think we’ve built a model for today’s economy and tomorrow’s economy. and that’s been the essence of the conversations. “charlie, why do you think this will work when the others may not have worked as well?”<\/p>\n
rick telberg<\/strong><\/p>\nwhat’s your answer for that? how is this model different?<\/p>\n
charly weinstein<\/strong><\/p>\nfor me, there are some differentiators here. we retain a significant investment in the business, so the partners retain a significant investment in the business. so we’re highly motivated to grow and build the business. we share a compensation incentive by outperforming targets, that partners’ compensation gets rewarded.<\/p>\n
we have the ability for i’ll call it recycling our ownership percentage. so we’ll still have normal retirements among partners, but when partners retire, we bring that stock back into the business, and then we put that back out to our younger partners, our lateral partners joining us, our partners growing into leadership positions. so by constantly being able to keep that ownership percentage at a very high level across the board, we’ve created a tremendous incentive to continue to grow the firm and to build a business of great value.<\/p>\n
rick telberg<\/strong><\/p>\nwhat can you tell us about the deal point? so deutsche bank is involved. there’s some debt involved. can you explain any of this before us?<\/p>\n
charly weinstein<\/strong><\/p>\nsure. for those who are familiar with private equity transactions, we’ve taken on some leverage, well within our ability to service that leverage. we have not a concern around that whatsoever. there’s even more room that’s available. and this is really all about what we’re going to do with that capital and how we’re going to enhance our opportunity to do strategic m&a, how we’re going to be able to bring talent to the firm, how we can use some of that capital to build and deploy technology, create margin growth, and financing is just one way of doing that. but what we’ve created is we’ve created a permanent stack of capital as well.<\/p>\n
rick telberg<\/strong><\/p>\nhow do you expand ebitda? how do you expand margin growth in a cpa firm? how does capital help?<\/p>\n
charly weinstein<\/strong><\/p>\nso here’s an interesting way that we look at it. our technology budget… last year, we did about $450 million of revenues. this year we’re on track for over $500 million of revenues, so obviously super strong growth in there. our technology budget last year was $26 million, and so that is a substantial amount of investment to make back in technology. this year, our technology budget will be over $32 million. and so investing all that capital back into building efficiencies into the way we work, building automation into the way we work, taking out some of the mundane, routine tasks that our professionals do, building more quality into our system, both on the attest side, on the tax side, our outsourcing practice. and so being able to build and deploy technology even quicker, that’s going to drive a lot of margin expansion.<\/p>\n
we have over 300 colleagues in our offices in mumbai, bangalore, and we have a global staffing strategy. and our colleagues in mumbai and bangalore, they’re directly part of our client service teams, and so we have this right-shoring and global staffing perspective that firms that join us as we grow will build that even higher. so we think that we have great margin opportunities there.<\/p>\n
and as we all know, adding more services and more capabilities to our team creates stickier clients. we’ve already got an nps score that’s at 87, which is pretty strong, and creating even stickier client relationships, that helps drive margin as well. if you provide value to your clients, you’ll add margin to your firm.<\/p>\n
rick telberg<\/strong><\/p>\nso you’ve talked about how the capital can be used to compete for talent, how the capital can be used to make strategic acquisitions, how the capital can be used for expanding margins through automation and technology. is this a situation that a lot of other firms are in now, and is this a solution for that?<\/p>\n
charly weinstein<\/strong><\/p>\nthere’s an incredible war for talent, and there is just a great need to stay at the technology forefront of what’s happening in the profession. [inaudible 00:16:49] cpa, we’re a partner in it. we’re developing das, a dynamic audit solution, which will very much change compliance on the attest side, of being able to stay ahead of that, customize applications within das for your own specific practice areas. keeping, attracting, and retaining talent, having equity options for your most talented people, those are things that will help firms compete. and if they can find a structure that works for them to help them compete, then that’s great.<\/p>\n
we think we have a structure. we think it’ll be appealing to others in the profession. the phone has been ringing, and it’s been a very and interesting time around the firm. but the world has changed, and we need to have an ownership model and a competitive model that competes with the rest of the world. i always say, “we’re pretty good at what happens within our own four walls, and great quality, and great people, and we know the cpa profession really well, and our competitors know the cpa profession really well. the world out there is changing, and so how do we stay in front of the world, and how do we compete with the rest of the world? how do we add value and provide services to our clients that they need to be successful?” if you can find a model that does that, then you’ll be sustainable, relevant, and important, and we think we have a model that helps us do that.<\/p>\n
rick telberg<\/strong><\/p>\ncan you talk a little bit about what tom and tony were describing as the plumbing, the relationship between the attest firm and the advisory firm, and the services agreement that usually goes between them?<\/p>\n
charly weinstein<\/strong><\/p>\nsure. that’s been around, and so go back to 1999 or 2000. i forget exactly when american express and goldstein golub came together, and so the alternative practice structure has been in place for over two decades. cbiz operates under the alternative practice structure, uhy. so there was very little reinventing the wheel. there’s a lot out there to go on in terms of, quote unquote, the plumbing, as you say. and so we did a lot of homework around the plumbing, and we think we’ve put something together that maintains appropriate independence and follows the approved structures that are out there. and so it was super important to us to make sure that we had all of those things in place.<\/p>\n
rick telberg<\/strong><\/p>\ni think there’s 200-plus partners, two thousand employees. how many go with which firm?<\/p>\n
charly weinstein<\/strong><\/p>\nit was interesting in that our partnership was 207 for 207.<\/p>\n
rick telberg<\/strong><\/p>\nunanimous.<\/p>\n
charly weinstein<\/strong><\/p>\nunanimous, and we also had a number of retired partners who were interested in this transaction. and so our retired partners were completely 100% onboard for this transaction as well, for this investment. and so we had a great response from our partnership and from our own community.<\/p>\n
in terms of alternative practice structure, essentially there is a services agreement between our attest firm, which is owned 100% by cpas and our attest partners, and then eisner advisory group, which provides all the services to the cpa firm. which is the standard alternative practice structure.<\/p>\n
rick telberg<\/strong><\/p>\nand you’re ceo of both?<\/p>\n
charly weinstein<\/strong><\/p>\nno. so you must have independent ownership and independent management of the two businesses, so michael breit is the ceo of eisneramper llp, which is the attest firm, and i am the ceo of eisner advisory group llc.<\/p>\n
rick telberg<\/strong><\/p>\nhow has it changed the culture? the culture of an accounting firm traditionally is very different than the culture of a private equity firm.<\/p>\n
charly weinstein<\/strong><\/p>\nit’s a great question, and that’s why we thought towerbrook would be such a great partner with us. towerbrook is a b corporation, which is unusual for private equity sponsors. so a b corporation is a business that has to adhere to certain environmental, social, and governance parameters, and so partnering with a b-corporation, we felt, worked really well with our culture.<\/p>\n
and indeed, towerbrook really celebrates our culture, and they understand it, and we spent a lot of years, as i said, from 2016 on, we’ve been thinking about this. what would be the right model? what would be the right culture? who would be the right partner? and we had a number of unsolicited opportunities coming our way, and because towerbrook understands our culture, and because the culture is so important to them as well, we think that we’ve gained the best of access to capital and also a partner that understands and celebrates our culture.<\/p>\n
rick telberg<\/strong><\/p>\nso what’s next?<\/p>\n
charly weinstein<\/strong><\/p>\nwell, there’s two ways to think about that. what’s next for eisner, and what’s next for the profession? when i look at what’s next for us as a firm, i see tremendous growth and opportunities. i see the ability to create value for our partners. i see great opportunities for our people and our growth, by adding more businesses and capabilities to the firm. i see great value for our clients. and so from a people, culture, client perspective, i see great things. i also see significant, significant growth as we put this capital to work.<\/p>\n
rick telberg<\/strong><\/p>\nand for the profession?<\/p>\n
charly weinstein<\/strong><\/p>\nand for the profession, i see a period of introspection, and i see other firms thinking about how they could unlock today’s value for their partners. make no mistake. we unlocked a tremendous amount of value for our partners, and so as other firms think about this, how can they unlock value for their partners and begin down the path of creating more value for their existing partners and for future partners? and so i think the profession really has to give some thought to whether the ownership model that they have is going to enable them to attract and retain the best people.<\/p>\n
rick telberg<\/strong><\/p>\nit sounds like you see difficult times ahead for many traditional firms.<\/p>\n
charly weinstein<\/strong><\/p>\nno. no, i think i’ve learned over all these years, and 42 years in the profession, and i’m 30-plus years with our firm, and i’m 20-plus years running our firm. i have seen many, many different models of success among accounting firms, and i see great resiliency in difficult times for accounting firms. firms probably had their best year. many firms had their best year through the pandemic, a testament to the resiliency of cpas, and firm ownership, and leadership, and management across the profession.<\/p>\n
this feels to me like a time of disruption, and so we have chosen a path that we believe will continue to lead to great success for ourselves. others will choose different paths, and i believe there will be continued great success across the profession.<\/p>\n
rick telberg<\/strong><\/p>\ni promised i’d only take 30 minutes of your time, so what do you see for the economy ahead? where are we in the covid pandemic cycle?<\/p>\n
charly weinstein<\/strong><\/p>\ni’m an optimist. i don’t have a crystal ball, but i’m an optimist, and i’m an optimist for this country, and i think that we will adapt and find ways to take the best of everything we learned in the pandemic. we all accelerated the ability to deploy the technology we have, to change our mindset about how, when, and where we work. and so i think we’re going to take it as an economy and as a country, i think we’re going to take the best of these learnings, and i think the future is really bright.<\/p>\n
rick telberg<\/strong><\/p>\nso bottom line, we’ve talked about what this means for eisner, what this means for the profession, where we are in the economic cycle. bottom line, what do you want the key takeaway to be for people listening to this message?<\/p>\n
charly weinstein<\/strong><\/p>\nembrace change. and, disruption is coming to the profession. be ready for it. build a platform that keeps you sustainable, relevant, and important, or join us. sorry, rick. couldn’t resist.<\/p>\n
rick telberg:<\/strong><\/p>\nthis is rick telberg for 卡塔尔世界杯常规比赛时间. thank you very much, charly.<\/p>\n
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