Backoffice FAO Administration Industry Valuation Notables
- Most accounting deals are priced 80 to 100% of annual revenues (source: AccountingToday.com) with a premium paid for outsourcing & managed solution providers with long-term contracts. Accounting firm deals typically pay 0% to 20% upfront based on either 1 to 1.3x gross revenues or 1.5 to 3X SDEs, or 2 to 4X EBITDA.
- Most scaled firms earn a higher EBITDA based on their Earnings multiples twhich ypically range from 6x to 8x EBITDA, or 11x to 14x net income after tax. These are rather moderate multiples, reflecting the limited scalability and growth potential of people-based services where capacity is always a limiting factor. Professional service businesses are highly profitable; typical profit margins range from 15% to 30% on revenues (EBITDA)
- Professional consulting services have hitorically traded at <1X revenue multiple while scaled outsourcing solutions have traded at >2X, with additional premium paid for industry centric, scaled asset (>$25M) with recurring managed solutions.
- Multiple deals to acquire books by platform across Intacct, Workday, Netsuite, SAGE, Microsoft, FinancialForce, Acumatica
- The Rise of the “As-A-Service” Economy (“AaS”) as illustrated by more than a $2 billion in funding over the past few years creates the opportunity for star performers to realize 2x EV rev/multiple at scale.
Backoffice Administration Industry M&A Deal Drivers Commentary
- Multiple acquisitions per quarter of accounting firms acquiring both CPA and non-CPA firms.
- Deals driven by digital transformation, industry consolidation, & shift to the cloud.
- Pricing commoditization of bookkeeping and accounting services augmented by demand for analytics, financial modeling and strategic financial services.
- Growth driven by demand for cloud solutions, F&A optimization, spend efficiencies, and analytics.
- Majority of service deals priced 80% to 100% of annual revenues, with outsourcing & BPaaS deals commanding a premium multiple.
Backoffice Administration F&A Deals YTD
The following list of M&A deals is for illustrative purposes only. For a complete list for your industry contact ERGO.
2019 – Sage Payroll Solutions sold to iSovled for 2.05x EV/revenue multiple.
2019 – Certify acquires Chrome River Tech expense reporting and invoice management in deal valued at more than $1b. Combined has 11k customers across SAP, Oracle, NetSuite, Sage Intacct, Microsoft, JD Edwards and QuickBooks.
2019 – Wave acquired by H&R Block for $405m.
2019 – JTC Group acquires Exequtive Partners, FAO w/ CXO-CFO partners fractional, plus corporate secretarial support (28 EE) for $25m.
2019 – ATAX Franchise Inc joins LoyaltyBrands to expand nationwide and serve the US Latino market. Undisclosed. Together we will create the largest Latino Franchise company with thousands of locations throughout the country"
2019 – Indinero acquires mAccounting, outsourced accounting and CFO services to SMBs. “We’ve always felt like the accounting firm that wanted to be a tech company,” “Founders need both real-time data and a financial partner to help them make smart decisions, secure investment, and scale,"
2019 – CBIZ (NYSE: CBIZ) acquires The Wenner Group (outsourced F&A CPA with 14 EE and $2.4m revenues).
2019 – CFGI [The Carlyle Group subsidiary, NASD: CG] acquires Pine Hill Group. Undisclosed. CFGI aims to be the go‐to partner for every CFO and finance executive nationwide. And expands offering to complex regulatory markets.
2019 – Addison Group [Odyssey Investment Partners] acquires DLC, finance and accounting consulting and staffing firm.
2019 – EY acquires Pangea3, global leader in legal outsourcing.2019 – Baker Tilly acquires H.J. Umbaugh & Associates, CPAs, LLP
2019 - Wifli LLP acquires Howe, Riley & Howe, PLLC.
2019 – ARGI Financial Group acquires Stiles, Carter & Associates,
2019 – Marcum LLP acquires Guyder Hurley MA CPA firm.
2019 – JS Held acquires Magnan Graizzaro Associates, accounting firm.
2019 – Prager Metis CPAs acquires Beck, Villata, & Co..
2019 – Brixey & Meyer acquires Harlow & Ohmer.
2019 – VACO acquires Aventine Hill Partners, Texas F&A advisory, consulting, staffing, recruiting leader.
2019 – BDO acquires AC Lordi, accounting, risk, and search services provider with 100 professionals.
2019 – Blucora, acquires 1st Global.
2019 – BV Investment Partners acquires Intelliteach, backoffice and managed finance & IT services for the legal and professional industry.
2019 – TPG, investment group, acquires Entertainment Partners, leader in payroll, tax, finance for the entertainment industry.
2019 – Out‐of‐the‐Box Technologies acquires EBS Associates. Undisclosed. Merger of two QuickBooks VARs creates national leader with offices across the United States.
