Wayne R. Pinnell has been leading Haskell & White as the firm continues to expand its mergers and acquisitions practice.
He became managing partner at the Irvine, Calif.-based firm in 2004 after eight years as a partner in the audit and business advisory services group. He oversees the overall strategic direction and operations of the firm, while continuing to serve clients as an audit partner.
Before joining Haskell & White in 1995, Pinnell spent more than a decade at BDO Seidman, rising to the partner level. He has experience in a wide variety of industries, including technology, manufacturing, wholesale distribution, retail, real estate and specialized services.
Pinnell’s clients have included publicly traded and privately held firms, ranging in size from small, family-owned businesses to corporations with annual revenues in excess of $300 million. He has assisted clients with initial public offerings, private finance, M&A transactions and Sarbanes-Oxley compliance.
Pinnell is a part-time faculty member at California State University, Fullerton, where he has periodically served as an officer of the Accounting Advisory Association, and is a member of the board of directors of the Center for Corporate Reporting & Governance. He is also a member of the Professional Services Reserve of the Orange County Sheriff’s Department, and serves as a director on the boards of directors for the Orange County Sheriff’s Advisory Council, the Boys & Girls Club of Santa Ana, and the nonprofit shelter Laura’s House.
Q: How is your firm involved in M&A activity?
A: First off, our firm serves a middle-market client base with both private and public companies. We got involved in M&A as a natural offshoot of our services. From a tax perspective, we’re helping to structure the best entity structure, and from the combined tax and audit side to help clients evaluate transactions.
Q: Do you find there has been a slowdown in M&A as a result of the economic downturn?
A: No, we have not a seen a dramatic slowdown. The economic downturn in some ways causes people to take advantage of opportunities they might not otherwise have been able to do before hiring an accountant.
Q: What kinds of due diligence need to be performed on M&A engagements?
A: Due diligence could look like an audit in many respects, for example, going through a seller’s financial statements. It could be dealing with their tax returns, benefit plans, computer systems and people. If the client is the seller, the due diligence usually is focused more on the ability of the potential buyer to actually be able to pay for the company that is being sold, as well as consulting with clients about their future combined organization and the overall structure of the deal in the first place.
Q: Is it difficult integrating accounting systems after a business combination?
A: We do some consulting around the computer systems, but we don’t do pure computer systems consulting. But that is one of the concerns companies need to evaluate: how a variety of systems are going to be realigned, reconfigured or replaced going forward to make a seamless organization. The computer services that we provide are around data integrity, security and internal controls-related matters. We’re not a systems integrator.
Q: Do you do Sarbanes-Oxley compliance work?
A: Whether or not it’s M&A related, we do get involved in Sarbanes-Oxley internal controls and we do audit a number of public companies. Sarbanes-Oxley is of course part of the audit. We also provide Sarbanes-Oxley consulting services to help companies maintain better internal controls documentation as required under that act.
Q: How did your firm get involved in the M&A area?
A: Just through the experience of handling client requests for transactions. A number of our partners did come from other firms where that was the experience that they had with clients. At this juncture we have three corporate tax partners who have a long history of M&A service. Altogether we have 10 partners, but seven have a lot of corporate focus. The other ones are actually well versed in structuring non-corporate transactions, particularly in the real estate industry.
Q: What kind of recruitment do you do?
A: We’re always looking for top-notch people. We have the services of nearly a full-time recruiter on staff who looks out for people to fulfill our shopping orders. M&A has become one of those interest areas, just as real estate is.
Q: What is it like competing against larger firms?
A: Public accounting always has been and probably always will be a fairly competitive industry. Having top-notch people is how you get the work done. We are extremely happy when we beat some of the other firms. The challenge is to convince the prospective client that we have something to offer that’s different than our competitors. When we’re going against larger firms, the typical areas where we’re able to excel are the types of transactions we’ve seen and the value we’re able to bring. Our standard rates are generally lower. Our tagline is “the value of experience.” We give them more value. We tend to be more expensive than smaller firms, but we also have more experience than they have.
Q: What are your firm’s revenues?
A: For the year ending June ’07, they were over $13 million. This year, through June ’08, we expect to be over $15 million.
Q: Do you think that the convergence of International Financial Accounting Standards with U.S. GAAP is going to have a big impact on your firm?
A: Everybody has to prepare, and it’s going to mean a series of educational opportunities and challenges for people. International standards will be here sooner than everybody wants them to be. The larger firms, as well as the standards setters and training bodies, tend to be ahead of the curve. It will be interesting to do a major overhaul.
Q: What do you think of some of the evolving standards such as fair value?
A: Over the last 20-plus years, there have been more and more standards moving toward fair value types of measurement. The difficulty for smaller nonpublic companies is to be able to have the metrics available to come up with fair value measurements. If they’re trading with freely tradable assets, determining the market value is very difficult. This is creating more opportunity for valuation firms, and also creating challenges for audit firms. We have to be able to assess the value, but obviously we can’t do the valuation work if we’re the auditors.