Matthew R. Crow, ASA, CFA, president of Mercer Capital, was quoted in the Financial Planning article, “Focus to offer cash rather than equity in acquisitions, CEO says.”
After Focus’ first earnings call, Crow questions Focus’ calculation of organic growth and the significant adjustments to net income (more than $36 million).
Some of their adjustments are debatable, because they are probably recurring byproducts of an acquisition model that deplete shareholder returns going forward. The magnitude of some of these adjustments may explain why management now favors funding acquisitions with cash.
Focus includes partner level sub-acquisitions in their calculations of organic growth, and I suspect some analysts and investors take issue with that. Management was asked pointedly about breaking out sub-acquisitions within organic growth, and the response was clear that they don’t intend to offer that.
Mercer Capital’s Asset Management practice provides RIAs, trust companies, and investment consultants with corporate valuation, financial reporting valuation, transaction advisory, portfolio valuation, and related services. Our industry blog, RIA Valuation Insights, is updated weekly with commentary on issues important to the Asset Management industry. We provided some initial thoughts on the Focus Financial offerings, an update after it went public, and will continue to follow related headlines.