CohnReznick Aldrich deal: partner pay matters more than revenue

October 14, 2026 · 11 min · Free, with full transcript

What decides whether CohnReznick's private-equity-backed purchase of Aldrich works? The episode argues it is not the $108 million in revenue, which already has three public versions, but the 48 partners: whether they stay, what they are paid after the scrape, and whether the EBITDA created by cutting their pay survives. It also covers the APS structure, cross-selling claims and the separate value of the Aldrich Wealth arm. Listeners learn how to build a partner table, why a 7 to 11 times multiple on scraped EBITDA raises the stakes, how to age WIP against past write-downs, how to set a working-capital peg before busy season, and why AICPA independence rules can cost clients or the deal.

Listen to the podcast

10 min

Chapters

Key takeaways

  • Build a partner table listing every partner's book size, age, current pay, post-scrape pay and covenant length before signing an LOI.
  • Push the value tied to partners whose departure would hurt EBITDA into the earnout or holdback, not the headline price.
  • Age WIP partner by partner and compare it with actual write-downs over the past three years to find inflated revenue.
  • Value a wealth or RIA business separately on assets under advisement, fee rate and client consent, not on an accounting multiple.
  • Check every audit client against the investors' portfolios and the wealth clients for independence conflicts before close.
Read the full transcript

Host:MBA Training. Today: CohnReznick's Aldrich deal turns on 48 partner paychecks, not $108 million in revenue. Revenue is the most overrated number in an accounting firm acquisition, and I'm told you'd sign that in blood.

Expert:In blood, in triplicate, with a partner co-signing. Revenue is the part the seller is proudest of and the buyer should care about least.

Host:Oh, come on. Revenue is the business.

Expert:In a partnership? Revenue walks out the door at six o'clock and decides whether to come back.

Host:Make it concrete. This week, CohnReznick announced it's buying the Aldrich group out of Lake Oswego, Oregon.

Expert:Perfect specimen. Before anyone has even opened the data room, the target already has three different revenue figures in public. Accounting Today has one, INSIDE Public Accounting has another, and CohnReznick's own press release has a third.

Host:Three numbers. Like a suspect with three alibis.

Expert:And all of them are roughly true, which is the annoying part. Gross, net, which legal entity, whether wealth management is in or out. Nobody's lying. Nobody's reconciling either.

Host:Set the scene for people who don't live in this world. Who's actually buying?

Expert:CohnReznick is private-equity backed now. Apax and a co-investor own a majority of the non-audit side. That's an alternative practice structure, an APS: one licensed CPA firm, meaning certified public accountants, does the audits, and a separate advisory company that isn't a CPA firm does tax and consulting. The investors can only own the second one.

Host:Which is why Aldrich's boss is joining as CEO of the advisory entity, not the audit firm.

Expert:Exactly. The org chart is a legal document wearing a tie.

Host:Quick aside, because it rhymes. Andreessen Horowitz, a16z, published an essay last week called "You Need a New CFO."

Expert:Saw it. Very confident title.

Host:Their argument is that AI is reshaping the finance function. One product they describe, CFO.ai, builds and maintains real-time financial models for you.

Expert:Fine, and worth taking seriously. But keep in mind that's a venture firm describing the market it invests in. And a real-time model of this deal would still be a beautifully refreshed spreadsheet of assumptions about whether a bunch of partners stay. The model doesn't know who's polishing their résumé.

Host:So the robot can't read the room.

Expert:It can't read the partner lounge. Different room, worse coffee.

Host:Back to the room, then. What's actually being bought?

Expert:People. The deal brings in 48 partners. In a CPA firm, the client relationship belongs to the human, not the letterhead. Lose a handful in year one and your investment case starts limping.

Host:Hang on, say the uncomfortable part.

Expert:Buyers pay for the firm, but the asset has legs and a non-compete with an expiry date.

Host:What are you seeing go wrong in the field right now?

Expert:Buyers underwrite the book without mapping it. The good operators build a table: every partner, their book of business, their age, their pay, and how long their non-solicit lasts, meaning the clause that stops them taking clients. Take two partners with identical books. One is locked in for years and loves the work. The other retires soon and is counting the days. Those are completely different assets.

Host:And the sloppy ones?

Expert:Average it. "Partners generate X each." Averages are where diligence goes to nap.

Host:Now the word everyone whispers. The scrape.

Expert:Right. A partnership has no natural EBITDA, which is earnings before interest, taxes, depreciation and amortization, basically operating profit, because the profit goes out the door as partner pay. The buyer creates EBITDA by cutting that pay. That cut is the scrape.

Host:How deep?

Expert:The Pennsylvania CPA society describes small cuts for newer partners and much deeper ones for founders and senior partners. Then the buyer puts a multiple on the result.

Host:Which turns a pay cut into price.

Expert:Allan Koltin, a deal adviser who advised both Apax and CohnReznick, so not exactly neutral, talks about seven to eleven times the scraped number.

Host:Wait, what? So every dollar you shave off a partner's paycheck is worth...

Expert:...several dollars of purchase price. That's why the scrape is the most negotiated line in the deal. It's also the line most likely to fall apart.

Host:Because the partner who took the cut leaves.

Expert:In year two, usually. And the EBITDA leaves with them, but the buyer already paid the multiple on it. You bought a racehorse and it moved to a competitor's stable with its saddle.

Host:That's grim, because behind every line of that spreadsheet is somebody who built a practice for decades and just got told their pay is now an "optimization lever."

Expert:Yeah. That bit doesn't sit well with me either. Some of those people took the deal to fund a retirement, and then discover they've signed up to work harder for less. Then they leave, and everybody calls it "attrition" like it's the weather.

Host:Let me push back. The dilution here is real. Aldrich partners bring in about a third less revenue each than CohnReznick's. But they're getting a big wealth platform, Aldrich Wealth, plus national service lines to sell into construction and agribusiness clients. Cross-selling closes that gap.

Expert:Maybe. Cross-selling is the most promised and least delivered synergy in professional services.

Host:That's cynical.

Expert:That's experience. Every integration deck has a cross-sell slide. Few have a cross-sell owner.

Host:Geographic deals often start dilutive and pay off later. That's literally the playbook.

Expert:Sure, and sometimes it works. My point is that only two things close the gap. Either revenue per Aldrich partner rises toward CohnReznick's level, or their pay drops toward Aldrich's economics. If the first is slow, the second gets ugly.

Host:I still think you're underpricing the wealth arm.

Expert:I'm pricing it separately, which is different. Value a wealth or RIA business, meaning a registered investment adviser, on assets under advisement, fee rate and whether clients consent to the change. Don't slap an accounting multiple on it. Aldrich itself sold its benefits business to Alliant a while back. The market already treats these as separate animals.

Host:Agree to disagree on how fast the cross-sell shows up.

Expert:Agree to check in after a year and see who buys lunch.

Host:Third test. WIP.

Expert:Work in progress: hours worked but not yet billed. It sits on the balance sheet looking like money. Sometimes it is money. Sometimes it's an old construction audit nobody will ever pay for in full.

Host:And firms carry it at full value right up to closing.

Expert:Of course they do. Write-downs only show up when you bill, so the pretty number survives until the deal closes. Same trick with utilization, which is the share of hours that are billable. Change the denominator from standard hours to hours actually worked and your star senior suddenly looks a lot less starry.

Host:Why does timing matter here?

Expert:Mid-December close, right before busy season. Year-end and tax work start piling up WIP fast. So you need clear answers on who owns pre-close WIP billed after close, how it was valued, and what the working-capital peg is, meaning the agreed level of working capital the firm must hand over.

Host:What separates the good buyers on that?

Expert:They age WIP partner by partner and line it up against actual write-downs over the past three years. If a partner's work consistently collects below the firm average, that partner is inflating the revenue you're paying for. Politely, but inflating.

Host:And the test that can kill the whole thing?

Expert:Independence. Aldrich's audit clients move into a firm tied to an advisory company that's majority investor-owned. The AICPA, the American Institute of CPAs, has an ethics committee that proposed treating those linked entities as one network under identical independence rules. It's talking about a second draft right now.

Host:Rules being rewritten while the deal closes.

Expert:Building the plane, pricing the plane, auditing the plane. PwC's comment letter even warned that parts of the draft diverge from the SEC, the Securities and Exchange Commission. So check every audit client against the Apax portfolio, the co-investor's holdings and the wealth clients before close. If you fail here, you don't get a price adjustment. You lose clients, or the deal.

Host:So when does CohnReznick find out if this worked?

Expert:December 2027. Count the Aldrich partners still there, and look at what they're paid.

Host:Not the three revenue alibis.

Expert:The alibis will be reconciled by then, just in time to stop mattering.

Host:One thing a listener should do on Monday before signing a letter of intent, the LOI.

Expert:Build the partner table. Every partner: book size, age, current pay, post-scrape pay, covenant length. Flag anyone whose departure would hurt EBITDA badly, and push their slice of value into the earnout or holdback, not the headline price. Pay up front only for profit that's still there when the partners have the option to leave.

Host:Pay for the people who stay, not the number on the press release.

Expert:Whichever of the three numbers it is.

Host:Sources: CPA Practice Advisor, Accounting Today and Insidepublicaccounting. Every link is in the show notes. That's it. The CFO decision tools are live at mba-training.com.

Read and go deeper