Baker Tilly leadership keeps talking about partners seeing a “multiple return” under the PE model, but that’s completely disconnected from reality for new partners. Our equity is nominal, with no meaningful upside. Cash comp bumps of 3–4% don’t come close to making up for the loss of real equity growth or buyout value. The idea that this is still a path to wealth creation completely out of touch. Let’s be real, being a Principal is a job with a title, not ownership with upside.
The next pe turn model is quite untested. New mountain pulled it off. Who else has done it? Time will tell if this is all worth it.
One would think there has to be a cap. First firm cuts costs, invests in AI and offshoring, boosts EBITDA and then gets 10x on the first turn. By the second turn, what costs are left to cut and how much more can be automated and offshored? That means they would need unprecedented growth in EBITDA over 3-5 years to get a meaningful return. What happens on the third turn? I’m just a tax guy but the math doesn’t seem plausible.
Sadly true. Used to be that partners were invested in their firms, stayed their entire career and worked their asses off for stewardship and long term wealth creation. Now, partner or principal looks less like ownership and more like employee. And with the PE model, there is not really a long term focus. Now partners are changing firms almost as much as staff and managers.
Shh! Dont spill the beans!
What have you actually seen as a younger partner in the model?
Did BT do MIPS/profits interests for new partners?
I’m a newer partner at another PE backed firm and the equity roll value was nominal (still meaningful if we see the 2-5x multiples they are saying at next roll, but tbd). The real value came in the profits interests, which mathematically worked out to be substantially more at the next roll vs. the rolled equity.