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The head of America’s largest accounting firm outside the Big Four is standing by its partnership model, even as rivals pursue radical changes that have brought the profession’s traditional structure into question.
Brian Becker, managing partner at RSM US, said the firm had ruled out becoming an employee-owned corporation, like BDO, or taking an investment from private equity, as other US accounting firms have done.
Instead, RSM intends to focus on integrating its international network to reflect the global ambitions of the mid-market businesses it caters to, Becker told the Financial Times.
The $3.7bn-in-revenue firm had no need to bring in private capital to fund expansion or to allow partners to cash out early, he said, and he expressed scepticism about the business models being pursued by US rivals.
“We deal with private equity a lot and their goal is to get a return on their investment,” he said. “You have to realise that, when you take that type of capital.”
Private equity has been attracted to the accounting sector by the combination of predictable cash flows from tax and audit work and the fast growth of consulting. Three top 30 US accounting firms have sold stakes to private equity firms, and several more have held talks. Proponents say such deals bring in capital to fund acquisitions and investment.
Becker cited RSM’s own history as a reason for not wanting to follow suit. For 12 years until 2011, the firm — then known as RSM McGladrey — was part of the publicly listed tax preparer H&R Block.
“It made us into a national firm, which was great. Not so great is that [owners] look for an exit. We don’t want to be put in the position where we are trying to drive [earnings] after a certain period of time.”
He said RSM had also considered following BDO in creating an employee stock ownership plan, or ESOP, which would buy the firm from existing partners and distribute shares to a wider pool of employees.
BDO converted to an ESOP in August, using $1.3bn in debt financing from Apollo Global Management, saying this would help retain staff at a time when accounting firms are struggling with a shortage of people entering the profession. The structure can also provide a tax windfall to selling partners and lower taxes on future profits.
“Any strategy that is dependent on saving taxes can be very short lived,” Becker said. “We don’t need capital and we don’t need a method to distribute income any differently.”
Becker took the helm of RSM US in 2022 having previously run its consulting business. After joining the firm in 1989 as an auditor, he spent most of his career in its technology consulting business, where he said integration with the rest of RSM’s global network was particularly pressing.
RSM US is the largest in an international network of firms using the RSM brand, which collectively have annual revenues of more than $8bn, mostly from mid-market companies overlooked by the Big Four accounting firms of Deloitte, EY, PwC and KPMG.
Earlier this year, it announced a plan to increase international co-ordination of its investments in technology. Becker said he was looking for other firms in the network to become “centres of excellence” in particular areas.
“Seventy per cent of [RSM US] revenue comes from globally active clients, so we’re receiving a lot of feedback that we need to be global. But not all countries can build cyber expertise or enterprise resource planning expertise. It’s about how do we look at this together and not duplicate building skills where we don’t have to.”
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