CBIZ acquired CMF Associates, a consulting firm that specializes in helping private equity firms with services such as auditing and preparing for an IPO, back in June as it aims to extend its reach further into the PE area.
CBIZ hopes to court PE firms and their portfolio companies as clients. “One of our key initiatives is to expand our advisory service offering,” said CBIZ Financial Services president Chris Spurio. “That’s what we think our clients want today and in the future. Today we’re particularly focused on the middle market and private equity. We set out to grow that practice organically and by acquisition. The acquisition of CMF was very attractive to us given their focus on private equity, their strong track record and leadership team. The acquisition of CMF was very strategic and connected, and very much in line with our strategy to grow our advisory services, particularly with PE, which we feel is a growing market.”
CMF Associates founder Tom Bonney is now a senior managing director at CBIZ and is leading an effort to open CBIZ offices in Denver, Chicago and elsewhere, hiring senior-level staff to make further inroads in the PE market. The people in CBIZ’s local offices will provide “boots on the ground” for that initiative, benefiting from some of the methods CMF has used to entice clients.
“I started the firm in 2002, and around 2003 and 2004 committed to growing an advisory firm united around meeting the needs of middle-market companies nationally,” Bonney recalled. “By 2017 we had basically grown into a practice focused on the needs of the middle market. At the time of the transaction we worked with over 3,500 private equity sponsors. At the time of the deal we had about $19 million in sales, and we saw the growth in private equity especially, but also in advisory services generally, and we began looking at a platform to grow faster and support a larger organization.”
He saw several benefits to being acquired by CBIZ. “They’re an accounting firm that has offices in all the major cities in the country, which will allow us to better leverage our business,” he said. “They have certain tangential services outside advisory. We believe what’s happening in the marketplace is clients are becoming more interested in one-stop shopping. Five to 10 years ago, manufacturing companies narrowed down their vendors. We see the same thing happening in professional services, with broader accounting and tax services. We really did have a shared vision in getting at this market opportunity together. We believe fundamentally we were better as one.”
Bonney has spent the past few months doing “road shows” to get to know the audit and tax personnel at CBIZ’s various offices. “We’ve also started to integrate service offerings into proposals,” he added. “We do a lot of interim CFO work. We’ve begun to integrate a valuation and tax service offering, and we’ve actually transacted business together. The CMF machine has generated revenue for the accounting firm, and the CBIZ machine has generated revenue for CMF.”
CBIZ has worked with the private equity industry in the past, but the deal with CMF brought its involvement to a new level. The firm hopes to expand its private equity client base, perhaps through further acquisitions.
“We’ve made acquisitions with firms that had clients that were private equity, but this is the first we did with a firm whose primary focus was private equity,” said Spurio. “This is the first acquisition where we were able to provide such a variety of services to private equity. Hopefully this is the first of others that we will look to do as we are committed to significantly growing this business, adding high-caliber firms and personnel to this practice.”
CBIZ is a publicly traded company, but it’s also affiliated with the accounting firm Mayer Hoffman McCann in an alternative practice arrangement, allowing MHM to perform audits.
“We’re seeing a lot of CMF’s clients needing services that they couldn’t provide,” said Spurio. “If there is an opportunity for one of these clients to have an audit done, that’s something that MHM would have to evaluate. CBIZ has an alternative practice structure and does not provide audits. We do that through Mayer Hoffman McCann, and we see opportunities and even audits with Mayer Hoffman McCann.”
CBIZ also sees opportunities in helping private equity clients adjust to the new accounting standards.
“In the context of the rev rec and leasing rules, they’re now awakening to what’s going to be required in the next few years,” said Bonney. “We’re working closely with them to bring the tools, processes, control structure and technical accounting expertise that CBIZ has into private equity to help private equity solve this technical accounting priority.”
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