DEFA14A: CBIZ to Acquire Marcum LLP, Creating Seventh-Largest Accounting Services Provider in the U.S.

CBIZ, Inc. has entered into a definitive agreement to acquire the non-attest business of Marcum LLP, a move that will establish CBIZ as the seventh-largest accounting services provider in the U.S. with approximately $2.8 billion in annual revenue.

Summary

• CBIZ, Inc. will acquire Marcum LLP's non-attest business for approximately $2.3 billion in a cash-and-stock transaction.
• The transaction is expected to close in the fourth quarter of 2024, pending approvals from CBIZ stockholders and Marcum partners.
• Approximately half of the consideration will be paid in cash, and the remainder in CBIZ common stock.
• CBIZ will issue approximately 14.4 million shares, representing about 22% of the company's outstanding shares post-issuance.
• The combined entity is projected to have annual revenue of approximately $2.8 billion.
• The acquisition is expected to be accretive to CBIZ's adjusted earnings per share by approximately 10% in 2025.
• Committed financing is in place, including a new $600 million five-year revolving credit facility and a $1.4 billion five-year term loan facility.
• Marcum's attest business will be acquired by Mayer Hoffman McCann P.C.

Sentiment

Score: 8

Explanation: The document presents a highly positive outlook on the acquisition, emphasizing strategic benefits, financial accretion, and market leadership. The tone is optimistic and forward-looking, suggesting a strong belief in the success of the transaction.

Positives

• The acquisition is expected to be accretive to CBIZ's adjusted earnings per share by approximately 10% in 2025.
• The combined company will have a broader range of services and deeper expertise, benefiting clients.
• The transaction strengthens CBIZ's presence in key markets and enhances its ability to attract and retain top talent.
• The acquisition enables greater investment in technology to support data-driven insights and solutions.
• The deal is expected to generate cost synergies of $25M+.

Negatives

• The transaction increases CBIZ's leverage, with a pro forma net debt to adjusted EBITDA ratio of approximately 3.25x to 3.50x at close.
• The issuance of approximately 14.4 million shares will dilute existing CBIZ shareholders' equity by approximately 22%.

Risks

• The transaction is subject to various closing conditions, including regulatory approvals, approval by Marcum's partners, and approval by CBIZ's stockholders.
• There is a risk of litigation related to the transaction.
• Anticipated benefits and synergies may not be achieved in a timely manner or at all.
• Integration may prove more costly and/or time-consuming than anticipated.
• The transaction could disrupt ongoing plans and operations of the parties.
• The financing may not be obtained as anticipated.
• Increased leverage of CBIZ following the transaction.

Future Outlook

The transaction is expected to be accretive in 2025, with an estimated contribution to Adjusted earnings per share of approximately 10%.

Management Comments

• Jerry Grisko, President and Chief Executive Officer of CBIZ, stated that the acquisition marks the most significant transaction in CBIZ's history and will provide a breadth of services and depth of expertise unmatched in the industry.
• Jeffrey Weiner, Chairman & Chief Executive Officer of Marcum, said that joining forces will capitalize on their strengths and leverage similar models to bring more diversified services and even greater subject matter expertise to their clients.

Industry Context

The acquisition will make CBIZ the seventh-largest accounting services provider in the U.S., positioning it as a leading provider of professional services to the growing middle market.

Comparison to Industry Standards

• The transaction will position CBIZ as the seventh-largest accounting services provider in the U.S., based on revenue.
• Marcum ranks as the 13th-largest accounting firm in the U.S. prior to the acquisition.
• The combined entity will have annual revenue comparable to other large accounting firms in the top 10.

Legal Proceedings

• The document mentions the possibility of litigation related to the transaction and the effects thereof.

Stakeholder Impact

• Shareholders: Expected to benefit from accretion in 2025 and long-term value creation.
• Employees: Opportunities for career growth and development within the combined organization.
• Clients: Access to a broader range of services and deeper expertise.
• Suppliers: Potential for increased business opportunities with the larger combined entity.

Next Steps

• Obtain approval from CBIZ stockholders.
• Obtain approval from Marcum partners.
• Satisfy other customary closing conditions.
• Close the transaction in the fourth quarter of 2024.
• Integrate Marcum's non-attest business into CBIZ.
• Achieve cost synergies and revenue growth.

Key Dates

Keywords

acquisition, merger, accounting services, financial advisory, CBIZ, Marcum LLP, Mayer Hoffman McCann P.C., professional services, financial results, earnings, revenue, synergies