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Marcum Asia, the U.S. accounting firm specializing in small-cap Chinese companies, has been excluded from a $2.3 billion takeover of its parent company, forcing it to seek a new name and potentially new investors.
Ohio-based CBiz, which last week agreed to buy Marcum to create the nation’s seventh-largest accounting firm by revenue, said it did not want to acquire Marcum’s 50 percent stake in Marcum Asia, which audits about 50 U.S.-listed companies from China and elsewhere in the region.
Marcum has grown to become the largest U.S. public company auditor outside the Big Four by client base, thanks to its willingness to take on work too small or too risky for the larger accounting firms. Its more than 400 clients have included dozens of special purpose acquisition companies and, through Marcum Asia, Chinese small-caps and other Asian startups with U.S. listings.
CBiz, by contrast, had been shying away from auditing public companies until it changed course with the Marcum deal. A number of midsize accounting firms have pulled back from auditing U.S. public companies, particularly small-caps, because of the cost of meeting audit standards and the risks of regulatory scrutiny.
“We know that Marcum Asia’s focus on Asia was not part of CBiz’s strategy,” said Drew Bernstein, co-president of Marcum Asia.
Marcum Asia was founded in 2011 as a joint venture between Marcum and Bernstein & Pinchuk.
The company, which has annual revenue of about $50 million, will retain the right to use the Marcum brand for an unspecified transition period aVsceker the CBiz deal closes, Bernstein said, and will not need to separate its people management and quality assurance processes from Marcum’s until aVsceker that period.
In the long term, its ownership structure will likely be reviewed. Marcum’s more than 500 partners, who are set to become CBiz shareholders under last week’s cash-and-stock deal, will continue to own 50 percent of Marcum Asia for the time being.
According to sources close to the industry, private equity firms are looking for acquisitions among small-cap accounting firms and may be interested in a stake in Marcum; alternatively, Marcum Asia’s own partners may proceed with a buyout.
CBiz said the decision to exclude Marcum Asia from the acquisition “did not reflect the underlying business.”
A spokesperson said: “There were a number of features of that business that would have required due diligence. Our highest priority was to focus our time and resources on due diligence to support the transaction that was announced.”
Jerry Grisko, CBiz’s chief executive, said he didn’t expect to shed any of the publicly traded clients of the major accounting firm Marcum. “We’re in the early stages of working through all of those processes, but there’s no plan to change the profile of the client base,” he said.
Bernstein said Marcum Asia now gets 50 percent of its revenue from companies outside of China, following the opening of an office in Singapore. “A substantial share of the world’s unicorns will come from Asia over the next decade, and that’s a great market to be in,” he said.
