Private Equity in Accounting (Part 2)

As promised in the last edition, this newsletter will be covering the topic of Bonuses and how Private Equity’s involvement in firms has impacted bonuses.

But before we jump into our discussion around PE, lets talk about CPE with our sponsor Earmark!

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Okay let’s get into it with the data on bonuses!

First off, when comparing the sample of PE backed firms against the general market, there was not a significant enough difference to say that PE was paying higher or lower bonuses. To be clear, bonuses in the PE backed firm sample were 5.5% higher on average, but they also were more concentrated in higher cost of living cities which could easily make up for a difference this small.

But here’s where things get interesting… in the first compensation cycle following a PE deal, there was a meaningful difference. Bonuses at these firms in the year following a PE deal were on average 16.6% higher than bonuses in the prior year at those same firms. Once again, unsurprisingly because of the impact on those who may have been close to earning that partner title, Senior Manager bonuses saw the highest boost in the first compensation cycle following a PE deal, with their bonuses coming at 43% higher than the firm’s bonuses in the year prior.

So some people might be wondering “okay that’s cool and all but what am I supposed to do with this information?”. And in short, if your firm goes through a PE deal, and that doesn’t sit well with you for any reason, it may be worth waiting it out just a little bit with the knowledge that this next bonus cycle may be a little extra rewarding for you.

And now stay tuned, in 2 weeks we’ll be releasing part 3 of this analysis and comparing both job satisfaction and hours worked at PE firms versus non PE firms.

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