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Private equity continues to reshape the accounting profession, but does independence still have a place?

Rob Brown sits down with Brian Blaha of Winding River Consulting to unpack what “enterprise value” really means for firms today. The conversation challenges a common assumption: that building value requires selling to private equity.

Brian introduces the concept of strategic optionality, a disciplined approach that allows firms to remain independent while still creating long-term value. From governance and capital strategy to leadership alignment and growth planning, this episode outlines what it actually takes to compete in today’s environment.

Independence isn’t passive; it’s intentional.

Welcome back to Inside Public Accounting. I'm your host, Rob Brown, and handling the interview today, Chelsea Summers, my co-host, is taking a day off. Today we're diving into one of the most important questions facing friend leaders right now. How do you create enterprise value without giving up independence? Our guest today is the prestigious Brian Blaha, a winding river consulting brand likes with accounting firm leaders across the world, particularly North America on strategy, growth, governance, long-term value creation.

Brian, welcome to Inside Public Hearing.

Thank you, Rob. Happy to be here. It's fun. I'm looking forward to the discussion today.

Well, this is certainly your heritage, Brian. You've made a name in this area, private equity investment, reshaping the profession. What kind of shape do feel the accounting profession is in right now?

You know, I think it's a really exciting time to be in the profession. Honestly, you know, you can be a little bit of don donning this going on to some extent, right? It's like, there's all of these different pressures going on where private equity changing just the speed, frankly, of which things are happening in the profession. But then there's technology transformation and organizational and governance changes and all of the things.

All in all, it's a fun time to be in the profession. I think the outlook should be bright and, you know, I'm looking forward to kind of diving in to all those specifics.

Yeah, you can see your eyes light up for just the thought of debating some of the things that Chelsea and I have talked about private equity a lot in the show because inside public accounting, he's very good at having the data and the stories behind the numbers. And I know you're a fan of the show, Brian, that that's great to know. But clearly many firms are feeling pressure to make a decision, take outside capital or risk falling behind. It's tough to compete with these firms that are backed. I know you and Gary Shamis David Toth at Winding River, you're

You're very much advocates of independence where it's possible. Your message is a little bit different from what I've seen of what you've said and written. Brian, generating enterprise value isn't about selling, it's creating optionality. Just talk us through what that means.

Yeah, I coined, I don't know if I coined it, but I've been using this term strategic optionality out in the marketplace. And to me, that means that, that there's things that you should be doing that you, that you can create and maintain the ability to run your firms from, you know, independent stature and have, you know, opera options out in the future or whatever track that may, may look like. And, know, when I, when I started, when we start to peel back the onion on, on that term.

A lot of it, you know, cause you always hear like, we can't compete with private equity. And if you really dive into their playbook, it's like, you start to ask yourself the question, well, okay, if they can do it, why can't we, why can't the leaders of the firms do it as well? And the fact of the matter is they can. And it requires a sense of discipline. And, know, I was talking with the leader of a, of one of the large private equity platforms, roll up.

that that's out there. And we started to dive into a model that I've helped firms work through. And, the question was, well, you know, it doesn't work to stay independent. I'm like, well, I'm not that's not what I'm seeing in the data and the information. And we got all the way through the model and the conversation turned to, well, the leaders just don't have the discipline that we do as private equity leaders. And in to me, that almost was a little bit of a step back. It was like, you know,

That's how they're viewing it to some extent. it's like going, well, okay, well that's that winding river. How do we help the firm leaders create and feel confident in the discipline that they're going to need to run the firm in a very similar way that the private equity firms are doing? So at the end of the day, what are they doing? They're helping the firms run themselves as businesses in a more strategic way. ⁓

Yeah. Discipline's an interesting word. We'll come back to that. Another word that comes up a lot is urgency. Independent firms competing in a P driven environment. There's a payoff, isn't there? A tension, if you like, between bringing money out of the firm now and creating enterprise value long-term. So I suppose a big picture, private equity is driving this sense of urgency, isn't it, Brian, within firms? From your vantage point,

What a firm lead is most anxious about right now. What is this urgency bringing about?

Yeah. And there's, to me, there's three main items that firm leaders are really wrestling with right now. The first one really is being driven by the private equity side. And that's just ownership and governance. Related to, you know, they're getting pressure from, they get calls every day, right? From the private equity firms. They're getting questions from their partners. They're getting questions from the associates in the firm. Like what's the strategic direction of the firm? So that's a huge one that firm leaders are just dealing with. And I know it's weighing on them.

The second one is technology and AI. You know, that's, there's, that's a whole nother show that we can go down for a future, future time probably. But as we get into enterprise value, that's that creation of what technology and frankly, the influence of AI is going to have on the firm. So those are the two huge ones. But then the third one I throw in there is just, just talent and leadership. And it's really an outcome of the first two in a lot of ways. you know, those three in, you

all to be the podcast, you know, in and of themselves, but those are the things I know that are just weighing on firm leaders today.

And it does create a phrase I've used a lot in my own podcast, Accounting Voices, leadership under pressure. You've been in this game a long time, Brian. Would you say it's harder being a leader now than it was 20, 30 years ago?

I, you know, probably in many ways, but I think that the profession has evolved to, where the, where the, partners are maybe finally realizing that it's, Hey, to be a partner today, isn't the same what it was years ago, right? It's like firm governance structures are more, more, prevalent. think people understand them. They understand that you need, you know, board of directors and that you have a C-suite that actually runs the firm on a day-to-day basis. I think.

When you see firms that still have all their partners around the table trying to make a decision, those firms are going to have a rude awakening in many cases, but the firms that can say, okay, separate the role that you play on your day to day and the title of what your ownership is in the firm and put different hats on, you know, based on, you know, what, the conversation is of the day. And for the most part, most partners and firms that are operating in the business.

have their owner hat on only a few times a year. So I think it is a mindset shift that just needs to occur in the firms. But once you're able to make that leap, then being able to run your business as a business, think with the support of an aligned partner group, isn't a better spot than where we were a decade or two decades ago.

I interviewed Mark Koziel, now heads of the AICPA on a stage in London a few years ago. And he said the partner model is broken because partners cannot be managed. They've all got so many different agendas and he pointed to the C-suite model. ⁓ So I totally get you on that. A common misunderstanding, Brian, seems to be that enterprise value is the same as selling. I mean, those are synonymous. You wouldn't agree with that, would you?

No, you know, in the way that I've been thinking about it is that, you know, especially if you are trying to be a platform, you're not really selling your firm to private equity. You're actually taking an investment, you know, in, in changing your capital staff or capital structure. So there's this misnomer that, Hey, I'm going to sell my firm to private equity. Well, in reality, especially if you're the platform.

Your job doesn't change the day after you take the equity. In fact, they're investing in you into the leadership team of the firm. And frankly, the strategy that you have developed and you're operating your firm now with a different stakeholder. And, you know, I was at the PE summit, back in November, accounting today's a PE summit and two of the private equity firm leaders had the same phrase and I, it stuck with me. I've been using them in.

some of my consulting work is that the PE transaction is a one time unlock of value. And that really struck me, right? And they, and it was repeated multiple times. And cause when you think about it, firms have undervalued themselves largely, although we can come back to that. And what the transaction does is essentially levels up to the value that the firms are at today. But in essence, you've then shifted

the value creation now to a new stakeholder. Obviously, dependent on the amount of the percentage of equity that you sell to the private equity firm. ⁓ So it is an interesting dynamic, because all that future value creation is then attributed to enlarge the account to the new ownership group.

Yeah. We hear the term the fight for independence. We have it here in the UK with Scotland and Ireland and Wales and the United Kingdom and Britain being a part of Europe or not. When we use terms like fighting and war, independence with accounting firms doesn't seem to be a viable long-term strategy because it is a struggle. are a lot of pressure. Tell us exactly what it takes to be independent today.

Yeah, well, I always start out with the concept of it. Do you understand what your North Star is? Do you understand what your why is for the firm? And frankly, most firm owners can't answer that.

They've

not designed it intentionally, Brian, a lot of the time.

Right. Yeah, right. And it's just, we're here to serve clients and they don't really have a direction for the firm. So if you're going to say you're going to stay independent, in many ways, that term has a little bit of a, you know, negative connotation in many ways, because it's, it's similar to status quo, you know, and I think firm leaders need to reshift that. And that's why this term strategic optionality has been interesting for me to use because it, it, can use it in place of

the term independence. And then it's like, okay, what would it take to maintain your strategic optionality versus what would it take to be independent? And those are two, they seemingly have two different, two different directions that you could go. So then when you look at it and say, well, what are the things that you have to do if you're going to maintain your strategic optionality? Or I guess you could say to stay independent. It's a whole litany of things, right? And that's going to be, how do I, how do I grow in a

cohesive way, what's my go-to-market strategy? What's my North Star envision? Do I have capital discipline? Do I take some of the chips off the table every year and reinvest them back in the business versus redistributing all of our earnings out to the partners, which is a huge break that you have to think about. I'd love to talk a little bit more about that. Can you scale your infrastructure as the firm grows?

And, know, ultimately what's your, what's your capital strategy? And I think the misnomer is, that you can't fund your own growth, but when you think about it, you know, like we're working with a couple of firms on, on evaluate stops. And, know, that's another vehicle that firms are using to essentially maintain strategic optionality or stay independent. But that model is, you you take on debt to, to.

redistribute the shares of the firm into a different ownership structure. Well, the traditional CPA firm has not utilized debt in that way, but the private equity firms are. So it's a difference in risk tolerance and what the private equity firms, how they're using their balance sheet. And there's nothing to say that an independent firm can't use their balance sheet in that way, which potentially can take up some of the pressure that you mentioned before.

When you say strategic optionality, sounds like you're building your own dictionary, your own doxology, But it's right, we don't need to change the terms of reference here because the game is changing. Those fans that choose not to take PE money, are they at any structural disadvantages?

You know, that's, that's an interesting question because when you think about what, what, what is happening is the private equity firm is bringing structure to the organization in many ways. And, you know, they're bringing outside advisory board members. They're bringing the discipline, financial modeling. mean, everything is about the model at the end of the day inside those firms. You know, it's all about eva.creation and what the multiple is and.

what that value move is and what the turn is going to look like, you the investable return for their shareholders. And when you look at the private firm, those things largely don't exist. And so the disadvantage is that they haven't put the time and energy to create those things. But can they? Absolutely. You know, we are seeing a trend of independent firms start to bring on ⁓

outside advisory board members, which I think is a really healthy, I know Gary's talked about it a lot. He's on the board of a number of firms. actually just announced that I'm on the board of one firm as well. it's that type of, you know, bringing on that type of external to help the leaders think through what some of this structure needs to look like inside the firm.

And then they can then operate their firm in a model that's more similar to what the P firms are operating in.

A couple of areas of potential disadvantage came to my mind in the areas of talent and tech, because both need investment. If you want to stay ahead with your tech stack, you've got to invest a lot in that and you've got to invest in talent. You've got to pay competitively. You've got to put a value proposition in place for your employees that stands apart in a very competitive marketplace. And private equity money gives you that.

Yes and no, right? Because the initial transaction, you know, largely goes to, pay the current owners, right? And redistribute the capital stack. So largely what those firms are doing, not entirely, but it's, well, it's in either one or two ways. bringing additional capital to the table, which further dilutes the owners or they're leveraging their balance sheet with debt to invest in those types of things. So if you just take a step back and say, you know,

Well, okay. Well, if that's what they're doing, why can't we do that as an independent firm? And the answer to that is, yeah. We all say in my history, you know, when we, the firm I was with, we made a ton of investments over the years. You know, we did 40 acquisitions. We invested in all the same tech staff that everybody else was investing in. Well, where did that money come from? Well, it came out of partner distributions, you know, and it was just, we just did it because.

that was was right for the business. ⁓ One of my clients has a, we've been saying in the boardroom is, he has a saying is, wanna make sure that the partner group is looking at the firm with the future intact and that we're making good business decisions for the firm, right? It's not just about the individual partners. So I'm not of the belief that you can't make those same investments.

Just because you don't have private equity capital. think it's just takes the firm to challenge themselves to operate in a different way. Which means that they have to operate similarly and scrape their partner's earnings and reinvest those earnings into the firm. But partners aren't necessarily going to give that up if they don't balance the equation. And so that requires them to relook at their deferred comp models and readjust what those look like. So if you're going to take money up a table and reinvest, then

The partners should feel like they're getting a higher return, you know, when it's time to liquidate that investment, either at retirement or through some other vehicle. Yeah.

Well said. What about managing partners that are very vehement and they're very emotionally attached to the firm? Obviously they built it, they owned it, they've got equity in it, but they say, not for sale. And they take a strong stance and they're bored, their senior partners go with them, but they've got to be doing things today and tomorrow to prove that that's a strategic decision and not just an emotional one.

100%. And so when we're working with firms and they come to us say, we're not for sale. What do we do? You know, which I think is the really question here, right? And it's like, we always start out with, well, what's your North star? What's your, why let's get that down on paper because it's hard to know where you're going. It's hard to say we're not for sale without having, you know, a strong firm strategy on what that's going to look like, or at least where you're, where you're headed. But we can fill in the strategy. Um, but then I think you got to look at, let's redefine.

the model that you're operating under. So meaning like, what is the structure that we're operating under? Do we have the right governance? And then ultimately, do we have the right, you know, organizational structure and firm model to actually facilitate that new way of being? So we can compete, you know, with, because everyone will say, well, we can't compete. can't get the, we can, you know, in a merger and acquisition scenario, we don't have the cash. Well,

Okay, well, if we redesign the firm, we retain some capital, build our balance sheet, now we can do that. But we start out and actually model that out. So there gives the leaders confidence that they actually can do that. So it's one thing to say it, you know, say it in print, you know, does it say it in the boardroom, but it's another thing to present actual data. And one thing I found was, is that firms really have not spent the time to actually model out.

you know, what their deferred comp program looks like. What is their, what does their forecast look like? Even if it's a five year, 10 year, we'll actually go out 20 years just, you know, with a, with a terminal type of assumptions, just so that they can see that the cash flow does work. And then we start making some business decisions around that. ⁓ and then along with them, modernize their governance structure. if they don't have, you know, a board or they, they are underdeveloped in their C-suite.

Well, let's add those elements so then we're on a strong foundation that then we can do the other things that are truly going to create enterprise value for the firm.

Are you going to the accounting background? I am a part qualified accountant, but I'm a former high school math teacher. So do you remember in mathematics, you had the Venn diagram, the overlapping circles. so this question, the strategic plan, the strategic optionality, are they overlapping circles? Are they the same thing that they absorb one another? Just unpacked out for us Brian.

I do believe that they are. mean, the strategic plan is helping the firm with direction. And so we've got that North Star out there. I like to talk about strategy and horizon. it's, horizon one is kind of your one year plan. Horizon two is your three to five years. So it's the things that you can start to throw the ball down the court and actually achieve. then horizon three are those things that you're starting to move the firm.

You know, past that you don't have a tangible thing, but you know where you want to go. ⁓ so much more directional orientation and horizon, where I think of strategic optionality is kind of the structure that makes all that happen. So definitely overlapping and not necessary, but kind of two different things. And a lot of times the strategic elements to help you maintain that optionality are all baked into the strategic plan. So there's definitely some, some things there.

that are overlapping and very similar.

So Brian, this is a conversation that many firms need to hear right now. We're going to bring you back for another episode and digest this a little bit more because I've got so many questions that I'd love to ask you, but let's finish with this one for the moment. Let's give some hope and some practical advice to these firms. Chelsea and I always like to do this. We're very pragmatic. What characteristics define a firm that truly has optionality?

We're starting to give them a roadmap or give them a checklist or a playbook or things to think about. And they need to know if they've got the governance model, leadership bench debt, the capital structure, the part alignment, the revenue mix. Just talk us through some of these and finish well for us here.

All right. Sounds good, Rob. So obviously by short answer that is yes, all of those things, right? And I know that that's all those things, but it's a heavy weight on the managing partner in a lot of ways, right? Because they're the ones that have to drive all of those things that you just mentioned, you know, when you think about it. And a lot of times these firms, especially in the category that, you know, that is core to your audience, right? It's like,

We got to figure out our go-to-market execution and there's so much to dive into there with who's our ideal client profile and what's our target market and what niches should we go after? ⁓ I like to talk in terms of legos. So what are the strategic building blocks that you have for the firm that can drive that North Star? And then ultimately, once you start to be a master builder with those legos, a lot of this other stuff tends to kind of fall into place.

⁓ you know, so it's looking at your revenue streams, where can we, where can we lean into all of those types of things? But then it's also about looking at your, you know, your gross margin and understanding what that, what's that building, the building blocks of your EBITDA calculation is. ⁓ I think that's a lot of times not, not as, ⁓ understood or, or dealt with, you know, by the firm leaders in many ways, but it's like, what is your talent model need to look like? You know, and that's going to even become.

you know, even more pressing in the coming days with AI and what that's going to look like. So we can talk more about that later. ⁓ technology investment, you know, and also the change management that goes along with that. It's like, don't forget about that. It's a huge part of the thing. And I, I think that firm leaders probably under invest in the change management. They do a great job of saying, let's implement technology and then forget about the change management. ⁓ so super important.

part of the playbook, distributed leadership. think firm, I'm really diving in with firms right now on, what does my leadership structure need to look like? And firms at these different break points are like, it's time to add the COO or the CIO or the human resource leader and so forth. So that's a super critical part of the roadmap. And then it becomes all those things that we talked about governance.

you know, the infrastructure, the capital discipline, and maybe that's where the end really is discipline. Just encourage your listeners to grab the bull by the horn, frankly, and kind of have some confidence that you can do this. And just surround yourself with some folks that, so doesn't feel like you're doing it alone.

That's a beautiful way to finish. started on discipline and you end on discipline. I love the way you did that. The message coming over clearly, Brian here is that staying independent is doable for accounting firms. It is a fight, but it's ultimately a choice. And I'm reminded of the quote by Harvey McKay, who wrote Swim with the Sharks. And he said, dig your well before you're thirsty. And you've got to get ahead of this. It's a bit of blessing to hear your perspective, your passion, your insights to the Brian.

We're going to have you back for another episode and go into this one more, but thank you so much for joining us today.

Yeah, thanks for having me, Rob I look forward to the next conversation.

Well, part two coming up, this is the Inside Public Accounting podcast. If you enjoyed the show, please share it with colleague tag us or Brian on LinkedIn and subscribe to the show on YouTube as well. And we'll see you next time with Brian Blaha on Inside Public Accounting.