In November Financial Times wrote a quick little story about accounting firms eyeing private equity deals, a topic that first gained visibility when TowerBrook Capital Partners purchased an ownership stake in EisnerAmper way back in 2021. The FT story listed BDO, Grant Thornton, and Marcum as firms that have explored these deals, though none of them actually pulled the trigger (as far as we know).
Around this time, we got a tip that Marcum was being seriously courted by private equity and likely to complete a deal soon. Our tipster didn’t have much more information than that so we shelved the tip and waited to see if more info came in. It did not.
The EisnerAmper deal was the first time a top 20 firm hooked up with private equity and according to the profession’s resident expert of wheeling and dealing Allan Koltin of Koltin Consulting Group, it certainly wouldn’t be the last. As we watched the talent shortage wreak havoc on firms large and small, it was expected that accounting firms would seek out all variety of mergers to bolster their staff numbers which has so far played out exactly as my psychic told me it would. And to help with these mergers, private equity was hovering around ready to inject cash into accounting firms.
Said Koltin in 2021 to Journal of Accountancy:
I would make a bold prediction here that in the next month, there will be a second top 20 firm to go the way of private equity. But I wouldn’t stop there. I think we could wake up a year from today and there could be no less than three, maybe even as many as four, of the top 20 CPA firms owned by private equity.
Well that didn’t exactly play out among top 20 firms but the economy sucks right now and something-something interest rates so we’ll blame that rather than suggesting Allan’s clairvoyance is not trustworthy. That said, smaller but not tiny firms like Citrin Cooperman and Cherry Bekaert jumped on the private equity train since he made that prediction and once again JofA tapped Koltin to share his expertise as the final boss of consultants. “Of the top 20 [public accounting] firms, more than half of them are in some type of transformative discussion — and a big part of that transformative discussion involves private equity,” he said in February.
Fast-forward to this week and we got this tip:
Marcum has started RIFs across all admin and operations due to their PE deal that has been signed.
We’re told that this reduction in force will soon extend to professional groups and that the employees acquired through the Friedman deal are particularly impacted.
I did a search for a news release on a Marcum PE deal because God forbid I work up a tip as a rumor when it’s actually a fully transparent deal that’s already been announced. That’s when I came across this Reddit comment from a month ago:
They will sell to private equity soon. Jeff has built up the firm to do just that. They are shopping themselves around to PE now and it will likely happen in the next 2-5 years.
New partners are salaried until (I think) 5 years in as partner and then depending on if Jeff likes you or not, you may get some (small) equity.
Jeff is a fucking maniac but you have to hand it to him, he built that firm from a small, one office firm into what it is now. He will sell out to PE for hundreds of millions of dollars. I wouldn’t want to be anything except an equity partner there at the moment though. They will get a nice payday but everyone else and future staff will suffer due to PE having its claws in there. Just my $0.02.
Huh. So maybe there is something to this.
As mentioned above, our tipster says so far it’s only admin getting the boot. And we don’t have confirmation of an inked PE deal, only the understanding that Marcum has been hungry for it for some time now. As of now, this is but a rumor. If you have more info, gimme a shout.
Update: we’ve received confirmation our intel is good regarding Marcum’s dip into private equity. Don’t have many more details beyond that at this time.
Having just left Marcum, my experience was that there is *not* much (or any, really) spare capacity in admin or ops to cut.
💯. Article is inaccurate as no RIF’s are happening or have happened. Typical end of busy season departures of low performers.
I saw the RIF’s first hand across admin staff. article is 100% accurate
Imagine being happy working at Friedman, then getting gobbled up by Marcum and now being let go? Thats gotta blow.
How does this make any sense? When we have private equity buy a vet practice, they centralize some things to cut costs, move apointment slots down to 15 minutes, which gets hate, and use their size to get some deals from suppliers.
And even then, vets just leave and start a new location. How can you cut enough costs at an accounting firm, where pretty much the majority of costs are salaries, and you bill by the hour?
It feels like private equity is getting fleeced here, or someone is.
The way these usually work (see EisnerAmper) is that the partners near retirement get a huge payday, while the dilution means that non-equity partners and folks near partner level now get a much worse deal when they do make partner. And in the long run, the lower level staff/seniors get lower raises and bonuses, along with lots of small cuts and annoyances like more tedious expense reimbursement policies and worse firm IT.
These acquisitions seem to have benefited private equity owners historically, but that could change now that interest rates are so much higher.
I had heard the deal was signed a few months ago but there were some regulatory “issues” that may have stopped or slowed the deal, including:
– The PCAOB going after one of the partners: https://www.sec.gov/litigation/admin/2023/34-96995.pdf
– The Canadians going after Marcum for less than stellar work: https://www.canadian-accountant.com/content/profession/enforcement-action-marcum
PE makes no sense to me. You take an all ready difficult situation in public accounting with lack of quality staff, standards complexity and over worked and stressed individuals, and make it far worse with even more greedy demands from new owners. Who would want to work in that environment?