When a Partner Leaves, What Actually Walks Out of the Door?

When a Partner Leaves, What Actually Walks Out of the Door?

What the upheaval at Weil, the emergence of Unity Advisory and the rise of private equity-backed accountancy firms tell us about the changing value of professional services partnerships.

The news surrounding US law firm Weil, Gotshal & Manges should make uncomfortable reading for anyone leading a professional services partnership.

A firm with more than $2 billion in annual revenue, a prestigious international reputation and decades of established client relationships has recommended an orderly wind-down following a succession of senior partner departures, leadership uncertainty and unsuccessful merger discussions.

It is a remarkable illustration of how quickly confidence in a partnership can deteriorate.

Meanwhile, in the UK, former Big Four leaders are building new advisory businesses such as Unity Advisory, supported by significant external investment and promising an alternative to traditional professional services models.

And across the accountancy profession, private equity-backed consolidators are reshaping the market through acquisitions, investment, new ownership structures and ambitious growth strategies.

Taken together, these developments might suggest that established accountancy partnerships face an unprecedented threat from departing partners and emerging competitors.

But is that really the case?

The similarities are striking. The underlying economics are not necessarily the same.

 

The situation at Weil illustrates a particular vulnerability within professional services: the relationship between individual rainmakers, client revenue and confidence in the wider partnership.

In certain areas of corporate law, a relatively small number of highly influential partners can originate enormous amounts of work. Their relationships, reputations and specialist expertise may represent a substantial proportion of a firm’s future earnings.

When those individuals leave, the commercial consequences can extend far beyond their immediate billings.

Their departures may prompt clients to reconsider relationships, colleagues to question the firm’s direction and other partners to assess their own futures.

At some point, the perceived risk of remaining can become greater than the risk of leaving.

This is arguably the most important lesson from Weil. A professional services business does not necessarily have to become financially distressed before it becomes vulnerable.

Confidence itself has commercial value.

 

There are important differences between the operating models of law firms and accountancy practices.

In many accountancy firms, particularly those with substantial audit, compliance and recurring advisory businesses, client relationships are supported by delivery teams, established processes, multiple service lines and institutional relationships.

An individual partner may be central to the relationship, but that does not automatically mean the client or associated revenue will follow them when they leave.

There are also practical considerations around continuity, regulatory requirements, systems, service delivery and the complexity of moving established engagements.

Restrictive covenants and partnership agreements can create further barriers, although their enforceability depends on the jurisdiction, contractual terms and circumstances.

None of this makes accountancy partnerships immune to partner departures. It does, however, mean that the commercial impact may be very different.

And importantly, not all accountancy partners are alike.

A partner overseeing a substantial portfolio of recurring compliance fees may have a very different relationship with their revenue from a specialist tax advisory or transaction services partner who personally originates and leads major assignments.

The size of a partner’s portfolio tells us relatively little about how much of that business is genuinely portable.

That distinction deserves far more attention when firms assess the commercial risk associated with senior partner departures.

 

The emergence of Unity Advisory presents a different challenge.

Founded by former senior PwC and EY leaders, Unity is not simply attempting to replicate a traditional partnership with a different name above the door.

Its proposition combines established senior expertise, external capital, technology and a different approach to delivering advisory services.

This is significant because it changes the choices available to senior professionals.

Historically, leaving an established firm to create a competing advisory practice could mean sacrificing infrastructure, brand recognition, financial security and access to resources.

Well-funded challenger businesses can potentially remove some of those barriers.

They can offer experienced partners the opportunity to build something new without necessarily having to fund the entire enterprise themselves.

And crucially, their success need not depend entirely on transferring existing client portfolios.

They can compete for new mandates, attract experienced teams and build client relationships around a different commercial proposition.

The threat to established firms is therefore not simply the loss of existing revenue.

It is the possibility that their most commercially ambitious people may see greater opportunity elsewhere.

 

The growth of private equity-backed consolidators adds another dimension.

Businesses such as Azets, Sumer, Cooper Parry and other acquisitive groups are creating larger platforms through investment, acquisition and integration.

Although their strategies and ownership structures differ, they are changing the competitive environment for traditional partnerships.

Access to external capital can accelerate geographic expansion, technology investment, acquisitions and the recruitment of senior talent.

For ambitious partners, these platforms may offer opportunities to build practices, enter new markets or access resources that would be difficult to secure within their existing firms.

But private equity introduces its own complexities.

The relationship between ownership, autonomy, financial reward and long-term value creation can look very different from a traditional equity partnership.

Partners may gain access to capital and growth opportunities while surrendering some influence over strategy, governance or the future direction of the business.

The question is not whether private equity is inherently more attractive than traditional partnership.
It is whether different ownership models are creating more compelling propositions for different types of partners.

There is also an important distinction between a consolidator acquiring established firms and a challenger building a new advisory platform.

One may be purchasing existing revenue, client relationships and infrastructure. The other may be investing primarily in the people and capabilities needed to generate future revenue.

Both are competing for talent, but their commercial models and associated risks are not identical.

 

Perhaps the most useful way for Managing Partners to assess this changing landscape is to distinguish between four forms of value:

1. Existing revenue: How much of a departing partner’s portfolio is genuinely dependent on their personal relationship, rather than the firm’s wider infrastructure?
2. Future revenue: How much new business would that individual have originated over the next three to five years?
3. People and capability: Would their departure influence other senior professionals, weaken a specialist practice or undermine succession plans?
4. Market confidence: What message would their departure send to clients, colleagues and competitors about the firm’s future?

These are fundamentally different risks.

And they require different responses.

A firm may retain almost all of a departing partner’s existing portfolio while losing its strongest source of future growth.

Conversely, the departure of a high-billing partner may appear commercially alarming but have a relatively limited long-term impact if the underlying client relationships and delivery capability remain embedded within the business.

The challenge is understanding the difference before the individual decides to leave.

 

The events surrounding Weil should not automatically lead UK accountancy leaders to fear an equivalent wave of partnership collapses.

The economics, operating structures and nature of client relationships can be materially different.

Nor should every emerging challenger or private equity-backed consolidator be viewed as an existential threat to established firms.

But these developments do highlight an increasingly important issue.

The market for senior professional services talent is becoming more competitive, more sophisticated and less constrained by traditional partnership models.

For established firms, the greatest risk may not be losing the revenue that partners manage today.

It may be losing the people capable of creating the revenue of tomorrow.

And that leads to a question every Managing Partner should be asking:

Do we really understand which individuals create the greatest future value for our business and are we giving them sufficiently compelling reasons to stay?