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Public Accounting Career Spotlight: Transaction Advisory

Mergers, acquisitions, divestitures, and business exits are critical and strategic business transactions that companies will find themselves either exploring or undertaking throughout their existence. However, before initiating those business deals, management has a fiduciary duty to conduct due diligence to gain a reasonable assurance that the contemplated business deal does make sense prior to kicking off any form of negotiations. So what is due diligence? Generally, due diligence refers to the care a reasonable person should take before entering into an agreement or a transaction with another party. Through the due diligence process, management can gather vital information about the other party that will help minimize the risks while maximizing the value of a potential deal.

In most cases, large corporations secure the expertise of an investment banking company that provides transaction advisory services to help them navigate through the troubled waters of the Mergers and Acquisition (M&A) process. For a very long time, very few accounting firms offered a separate line of focus on full cycle transaction advisory. For instance, PricewaterhouseCooper (a Big Four), Parente Beard LLC (a Top 20), RSM McGladrey (a Top 10), and Weaver (a Top 50) all did not formally launch their transaction advisory practices until 2006, 2010, 2007, and 2009 respectively. As of 2011, I will go out on a limb and assert that at least half of the U.S. 100 largest public accounting firms (irrespective of the publication compiling the ranking) prominently offer transaction advisory as one of their primary areas of practice. Public accounting firms main revenue drivers (audit and tax) are seasonal in nature however transaction advisory provides a tremendous opportunity for accounting firms to rake in fees year around. According to a 01/03/2011 report published by the Wall Street Journal (WSJ), FY2010 total U.S. M&A activity was $ 875 Billion. It now becomes relatively easy to understand why more and more accounting firms want in on the M&A advisory business. I personally think that it makes great sense for accounting firms to offer transaction support services to their clients.  Since accounting firms typically work very closely with their clients, they are often the first outside/unrelated party that their clients talk to when the latter are contemplating an acquisition, a merger, or a sale of the business. Consequently, accounting firms with a transaction advisory division are very likely to get first shot at advising their clients  on a potential business deal.

Now that I finished putting things in the proper context, it’s only appropriate that I talk about two of the most common categories of services offered within a transaction advisory practice of an accounting firm: buyer services and seller services. Buyer services are specifically designed to help acquiring companies evaluate key business driver trends and risks factors associated with potential targets. Seller services on the other hand are geared to help acquisition candidates get  ready for the potential buyer(s)’ due diligence process so as to be positioned to maximize the value of the deal. For those of you considering starting your accounting career in transaction advisory, some of the traits that companies look for in a candidate are a strong knowledge of accounting and applied financial theory, keen analytical capabilities, and excellent verbal and written communications skills. Although most accounting firms prefer recruiting experienced candidates holding a graduate degree in finance or accounting to their transaction advisory staff level openings, many investment banking companies and only a select few of the largest accounting firms will consider recruiting candidates with a combination of an undergraduate degree in accounting or finance and at least one year of transaction support work related experience. If you would like to know more about what it is like to work in transaction advisory, the folks at Ernst & Young did a superb job putting together a Q&A style information page about various aspects of embarking in a career in transaction advisory.

Further reading:

  1. A Detailed Description of Transaction Advisory Services, Houlihan Lokey: “an international, advisory-focused investment bank with 14 offices throughout the United States, Europe and Asia.”
  2. An In depth Overview of Transaction Advisory Services, Cherry, Bekaert & Holland, L.L.P.: “a full service CPA firm providing audit, tax, and consulting services from several offices in southeastern USA.”
  3. Transaction Advisory Services Consulting Marketplace: Key Trends, Profiles and Forecasts (Free registration required), Kennedy Consulting Research & Advisory: “a leading market research provider on the Management and IT consulting professions.”

One Comment

  1. Comment by Luis Garcia:

    great information and inspiration, Also like to admire the time and effort you put into your blog and detailed information! I will bookmark your site!thanks

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