LBMC, a Nashville-based accounting, business advisory and professional services firm, has an increased appetite for acquisitions, particularly around non-profit healthcare, according to CEO Jeff Drummonds.

The 35-year-old privately held firm has grown largely organically but is now “aggressively opportunistic” about buys, Drummonds said. As traditional CPA firms continue to diversify their services portfolio, the industry has become a bit of land-grab, he explained, with more companies turning to M&A to add offerings and fill gaps.

Nashville is home to numerous non-profit healthcare organizations, many of which are LBMC clients. As such, the company is interested in acquisition targets catering to that sector. Attractive capabilities include ERP implementation, data analytics, and transaction services such as due diligence and merger integration, Drummonds said.

Generally speaking, LBMC is seeking complementary tuck-in businesses that serve the healthcare and technology sectors, the executive added. It is also keen on building its presence in the Southeast.

According to INSIDE Public Accounting, LBMC is the 43rd largest CPA firm in the country. The company generated revenue of USD 120m in 2018 and is growing organically at north of 15% annually, Drummonds said. Roughly two-thirds of its revenue is recurring, with 50% of business coming from traditional CPA services.

Approximately 60 partner shareholders own the business, according to Drummonds.

LBMC provides accounting and finance, human resources, technology, information security, and wealth advisory services. Healthcare comprises 30% of sales. Other core verticals include private equity, manufacturing and distribution, high net worth families and family offices.

The company has 10,000 clients throughout the US and roughly 600 employees, with additional offices in Chattanooga and Knoxville, Tennessee.

In August 2017, LBMC acquired W Squared, a key strategic purchase that gave it a strong managed services business. The Tennessee-based outsourcing solutions company contributed to 5% of overall growth last year, Drummonds noted.

According to a recent report by this news service, valuation multiples for technology companies typically range from 1x to 3x revenue, while traditional accounting firms garner between 0.6x and 0.9x revenue or from 5x to 7x EBITDA. Traditional CPA firms usually have EBITDA margins between 5% and 7%, that report states.

There continues to be ongoing consolidation in the space, Drummonds noted, with many firms acquiring for new capabilities or geographies.

In January, Houston-based accounting firm Calvetti Ferguson acquired Dallas-based CPA firm Mayrath & Co., while accounting and consulting firm Wipfli acquired New Hampshire-based Howe, Riley & Howe, marking its second expansion in New England in six months, according to news reports. That same month, accounting firm Briggs & Veselka acquired CPA firm Glass & Company, its fifth transaction within a year, while Chicago accounting and advisory firm Baker Tilly Virchow Kraus expanded into North Texas via its purchase of Montgomery Coscia Greilich.

In November, accounting, consulting and wealth management firm Moss Adams purchased cyber risk management consulting firm AsTech Consulting.

by Deborah Balshem in Fort Lauderdale