MGO acquires Schwartz & Co.
MGO LLP, a Top 100 Firm based in Los Angeles, is adding Schwartz & Co. LLP, expanding the firm’s presence in New York, particularly in the financial services, cannabis and entertainment industries.
The deal will create a firm with combined revenue expected to reach $90 million by the end of the year. As part of the deal, all five Schwartz & Company partners are expected to join the 32 partners at MGO, short for Macias Gini & O’Connell. The professional team will have a total of 450 employees.
Before the deal, MGO was on pace to have $80 million to $85 million in annual revenue, according to MGO CEO and managing partner Kevin O’Connell, while Schwartz traditionally has $7.5 million to $8 million in revenue. MGO ranked No. 75 on Accounting Today’s 2019 list of the Top 100 Firms.
The combination is also expected to strengthen several practice areas at MGO, including SEC and public company audits, private equity, family office, audits, tax planning strategies, international business and wealth management. The deal will also help MGO expand its growing entertainment practice in New York.
“We’ve had a national practice for many years,” O’Connell told Accounting Today. “We have more clients in New York and they became more significant to our practice. That was one of the reasons why we wanted to have some boots on the ground and why we launched a local office and got that process started back in the fall of last year. We also had identified New York strategically at one of our partner retreats back in 2016, and the genesis of that was related to our entertainment practice. New York is a gateway city and home base to a lot of people in the entertainment business, so it always made sense to us to look to New York as part of expanding that practice.”
MGO has also been expanding its cannabis industry practice. O’Connell is anticipating that federal prohibitions on cannabis may go away in the next few years: “When that happens, we think there’s going to be a shift from what people have been doing with the Canadian market to the U.S. market, and we want to be positioned well there to continue to grow and expand what we’re doing in the legal cannabis industry,” he said.
He has known and worked with Michael Schwartz, the managing partner of Schwartz & Company, for over a decade. “It was really serendipitous that we had a chance to meet with our longtime friend, Michael Schwartz, and we learned more about what they were doing in New York,” said O’Connell.
The two discussed the potential deal over dinner. “We coincidentally sat down for dinner one night when Kevin was in New York after they had already opened up the New York office,” said Schwartz. “As we talked about it, the cultures are so aligned. To both of us it’s really key providing that passionate, quality service to our clients, and for our staff. We are predominantly in the financial services, private equity, VC and family office world, so we have needs nationally in what we do. And with Kevin and the team on the West Coast, and us in New York, it was the right time, and with them opening up in New York, it was the right time and the right fit for us to be able to combine forces.”
Schwartz has been working with financial services clients for 28 years. “We have a very large outsourcing division where we run private equity firms, family offices and VC firms,” he said. “We’re going to expand that across the nation with Kevin. What it gives us is public company work, so we can now do earnings and due diligence work for the larger players, because MGO has that experience.”
MGO has 12 accounting offices, plus a global servicing center in India and a staffing business based in Calabasas, California.
The firm has been expanding its entertainment practice as well as its financial services practice. “It really spans across the traditional stuff you’d expect: accounting, tax, other types of business advisory services. We’re really building out more of a platform financial and advisory services model,” said O’Connell. “In addition to the traditional CPA services, we provide staffing and those types of services, but we’re also providing brand advisory services. We’re also providing other technology-related services. We also added a commercial real estate brokerage to assist in building out what we’re doing for our cannabis clients. We launched an investment bank about a month ago that’s also going to help with a whole array of capital markets advisory services.”
MGO has been building its clients and revenue in the cannabis industry as well. “We find ourselves at the intersection of entertainment and cannabis,” said O’Connell. “There’s a lot of people in the sports and entertainment world that want to get involved in the cannabis industry. In fact, that’s one of the reasons that we got into it originally. We’re finding out that there are people out there that have a brand in the entertainment business, but they don’t have a team around them that can help them build out a company in the cannabis vertical, so we’ve been working with a lot of clients in the entertainment space and helping them to do that.”