Demand for Quality of Earnings & Business Valuations On the Rise
Accounting firms are enjoying the fruits of the red-hot M&A market, even if they’re not interested in buying another firm or selling to a larger entity. While the profession is consolidating quickly, the story isn’t unique. The same factors that are fueling M&A in accounting are impacting other industries, and firms with succession planning expertise are filing the demand to help businesses navigate a sale or acquisition.
Another firm tangentially enjoying the M&A boom is Houston-based Calvetti Ferguson, which launched its advisory practice in 2015 as a full-service accounting and finance resource for both buyers and sellers in M&A transactions – a service line that was inspired by the past experiences of many of the IPA 200 firm’s partners.
“Many of the partners, including myself, were previously CFOs, controllers, VPs of finance, treasurers and chief restructuring officers,” says Chin Yu, PIC of the advisory practice. “In these roles, we purchased M&A services from other firms, and often experienced first-hand the service gap our business clients, institutional buyers and relationship partners were complaining about.”
Those recollections and conversations resulted in a practice that comprises due diligence support, quality-of-earnings analysis, M&A deal advisory and consulting, deal preparation and buy-side/sell-side representation. A little over six years after its inception, the practice now represents about 15% of the firm’s $22.6 million in net revenue.
Yu says fees for M&A services are in line with Calvetti Ferguson’s other specialty consulting services, such as tax incentives or bankruptcy and restructuring, and notes that clients like having access to the firm’s full scope of services throughout the entire course of an M&A deal, with the tax team’s consulting efforts occasionally saving clients more than their M&A fees.
“Most business owners who are selling have not been through an M&A transaction before and it can be scary to think about all the nuances and steps involved,” he explains. “The impact of making a mistake is a dead deal, or worse, a completed deal that the buyer and/or seller regrets. We’ve found communication and listening skills to be critical in the success of any M&A experience, most hire us because of our beside manner – our M&A process just makes sense to them.”
Just as they showed during the pandemic, Yu believes accounting firms are uniquely positioned to act as trusted advisors for clients going through an M&A transaction. And as the market continues to heat up in a variety of corners around the economy, they expect their firms to continue to reap the benefits – even if they’re never directly involved in a merger with another accounting firm.
This article was published by INSIDE Public Accounting in their March 2022 issue.
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INSIDE Public Accounting (IPA) is a leader in practice management resources for the public accounting profession that include: the monthly practice management newsletter, the annual national practice management benchmarking reports and corresponding reports and training. IPA has assisted firms across North America grow and thrive since 1987.