Top 100 Firm Grassi announced a number of ownership and structural changes, including establishing an employee stock ownership plan and an alternative practice structure.
The changes are aimed at helping the firm maintain its independence, and to strengthen its relationship with its employees and reward them for helping build up the firm.
“It aligns our employees and makes them owners of the firm; it takes everyone to the next level; and clearly what it really does is get everyone rowing in the same direction, so no one’s wondering what’s going on with their firm,” Grassi founder, CEO and managing partner Louis Grassi told Accounting Today.
“It’s where the future lies,” he added. “We always want to be ahead of the curve; we always want to stand out and not fit in.”
The firm will be funding its ESOP internally, buying equity from the partner group to distribute to its staff. That is in contrast to one of the few recent accounting firm ESOPs, where Top 10 Firm BDO took on private credit in August to fund the change (see story).
With $110 million in revenue in 2022, Grassi ranked No. 59 on Accounting Today‘s most recent list of the Top 100 Firms, with 52 partners and almost 450 employees.
As part of the restructuring, the firm will split into two entities: Grassi Advisory Group, which will perform all advisory and tax services, and Grassi CPAs, which will handle all audit and attest work. Grassi himself will continue as head of the first group, while the firm’s head of audit, Ronald Eager, will run the second.
Alternative practice structures are common in private equity deals involving accounting firms, since non-CPAs can’t own public audit practices; in this case, it’s not about allowing different corporate ownership, but making sure all the employees of the firm can own stakes, regardless of whether they are CPAs.
“You can’t have non-CPA owners in New York unless you break up the practice into two parts,” Grassi explained. “The only way that this can get accomplished is through this vehicle.”
The firm had been looking at the possibility of an ESOP for over a year.
“We audit a lot of ESOPs and are very familiar with the space, and we’ve seen all of them be very successful,” said Grassi. “As we looked at our future, we said, ‘That’s where we want to be.'”
“I think the market and the whole world is going to where employees are empowered and have some form of ownership,” he added. “We’ve been approached by everyone, to be candid, and we decided that this was the best way. We didn’t want to go the private equity route; it wasn’t appealing to us. When we looked at all the options, we decided, ‘Let’s be little different.'”