CBIZ to Acquire Marcum, Enhancing National Advisory Services

CBIZ has revealed its intention to acquire Marcum, the 13th largest accounting firm in the United States, in a strategic move aimed at strengthening its position in the professional advisory services market. This acquisition is anticipated to close in the fourth quarter of the year, positioning CBIZ as the seventh largest accounting service provider in the nation. Despite facing challenges in the second quarter, including adjusted earnings per share (EPS) impacts from the departure of personnel and transaction-related expenses, CBIZ reported a revenue increase of 5.4% for the quarter, maintaining a positive outlook for future growth.

Key Takeaways

• In the second quarter, CBIZ’s total revenue rose by 5.4%, with a 7.2% increase for the first half of the year.
• The company confronted hurdles, such as the exit of a small team and associated expenses from the Marcum acquisition, which contributed to a $0.03 adjusted EPS impact.
• Earlier this year, CBIZ made three acquisitions and expects the Marcum deal to finalize in the fourth quarter.
• The company forecasted a 10-12% growth rate in adjusted EPS for full-year 2024 compared to 2023.

Company Outlook

• CBIZ is projecting a stronger second half of the year, aided by easier year-over-year comparisons.
• The Marcum acquisition aligns with strategic goals, anticipated to yield significant cost synergies and efficiency improvements.
• The company remains positive regarding client prospects and future growth opportunities.

Challenges and Opportunities

Challenges:

• The exit of a small team in the property and casualty insurance sector and related expenses negatively impacted earnings.
• Delays in project-based discretionary services and variations in business timelines affected financial outcomes.

Opportunities:

• CBIZ has maintained a robust growth trajectory and expects improved margins through efficiency gains and offshoring.
• The company boasts strong client retention rates and consistent cash flows, which supports its financial stability.

Financial Insights

• CBIZ incurred $6.7 million related to the Marcum acquisition in the second quarter.
• Revenue growth would have been stronger without certain impacts, indicating underlying strength in operations.

Q&A Highlights

• The company discussed its plans for integrating Marcum and reducing costs associated with the acquisition.
• CBIZ emphasized the strategic fit between its goals and Marcum’s capabilities, particularly in technology and innovation.

The acquisition of Marcum is a substantial move for CBIZ, expanding its reach and capabilities in advisory services. The combined entities are projected to generate approximately $2.8 billion in revenue with more than 10,000 professionals serving over 135,000 clients. This M&A activity not only enhances CBIZ’s service offerings but also positions it as a formidable player in the industry. With backing from a $2 billion funding commitment, the acquisition will be financed 50% in cash and 50% in shares, facilitating a seamless transition. CBIZ anticipates that synergies from the merger will lead to significant cost reductions and operational efficiencies by 2026, paving the way for continued earnings growth.

In summary, while challenges from the second quarter persist, CBIZ’s strategic efforts, particularly the Marcum acquisition, are set to bolster its position and drive future growth. The company’s proactive management and commitment to improving operational efficiencies set a promising outlook for both short-term recovery and long-term success.