CFO data analytics spurs Accordion shopping spree

As Seen in Mergers & Acquisitions: CFO Data Analytics Spurs Accordion Shopping Spree

It took 12 years after its launch for CFO service provider Accordion to make its first acquisition in 2021. Demand for digital-driven CFO services has led to four more acquisitions over the last two years. Founder Nick Leopard talks about the industry and the firm’s growth strategy.

When Leopard launched Accordion in 2009, he says private equity firms were almost exclusively focused on their multiple arbitrage – the difference between the acquisition cost and exit price.

But as the industry has matured and dealmaking has dried up, improving portfolio company operations has become a priority as value creation has become the new mantra. Increasingly savvy LPs are now pressing for operational details before they invest.

“There is growing LP pressure to understand the GP’s secret sauce,” Leopard says.

One of the biggest adjustments for a new PE-backed middle-market company is picking up the operational pace. One of the biggest tasks for the new PE owners is syncing systems.

Consequently, outsourced areas like transaction and CFO services are drawing attention.

Recent Transactions

• HamptonRock Partners in September lured a team from Houlihan Lokey (NYSE: HLI) to open a new office in Houston and launch its transaction advisory and CFO services practice.
• In July, Everlane Equity Partners‘ Venture Count portfolio company bought Tarsus CFO Services.
• In June, Kolhberg & Co. acquired consultancy Riveron from H.I.G. Capital, which retained a minority stake.
• In December 2022, Investcorp acquired a majority stake in CrossCountry Consulting, a business advisory firm that provides CFO services.

Data Analytics
In its first decade, Accordion was growing organically by providing traditional CFO services to the private equity industry. Leopards says it quadrupled revenues and attracted a 2018 minority investment from San Francisco-based FFL Partners with audits, financial modeling, installing KPIs and the like.

Before launching Accordion, Leopard helped manage a $200 million mezzanine debt fund at BHC Interim Funding, which focuses on short-term investments in middle-market companies. He says his experience there during the 2008 financial crisis motivated him to launch Accordion to arm CFOs with the resources they need.

“CFOs were under an enormous amount of pressure, but often didn’t have the resources to respond,” he says.

Recently, PE shops have started demanding more from their portfolio CFOs and CFO service contractors. They’re looking for technology solutions.

“Data analytics has become the hot topic for private equity-backed companies,” Leopard says. “A lot of sponsors are taking more of an institutionalized approach, especially to things like onboarding.”

Harnessing and using the data portfolio companies produce has become a priority, Leopard says.

“They haven’t figured out a way to stitch that together,” Leopard says.

Addition by Acquisition
In May, Accordion bought India-based Merilytics, a data management company that aims to tame a PE shop’s data jumble to create “actionable insight.”

In February, Accordion acquired OperationsRX, a North Carolina advisory firm that uses data and technology to make supply chains more efficient.

Its two 2022 acquisitions were also tech-related. It purchased Platform Specialists and ABACI for their technological expertise with enterprise resourcing planning and enterprise performance management.

Accordion’s first acquisition occurred in 2021 when it acquired Mackinac Partners, a financial advisory, restructuring, and operational turnaround firm. Leopard says the Mackinac transaction was meant to “create a counter-cyclical side of the house.”

Accordion is also set to open a London office in the summer to bring the firm’s tech-driven CFO services to Europe. Leopard says it appears no one is doing what Accordion is doing in Europe.

“The office of CFO can be a real source of value creation,” Leopard says.