- Breaking into transaction services
- Transaction services compared to audit
- Being a generalist versus a specialist
- The importance of teams and mentors
Ryan McCarthy, a PwC alum, is an Associate Director of Healthcare Transaction Advisory at Berkeley Research Group.
I went to Baylor University right as we were getting good at sports, but managed to come out with a master’s in accounting and job with PwC in Houston. Didn’t end up in Energy audits though during my 3 years and didn’t end up in Healthcare audits in Nashville after I transferred there for 3 more years! But what I was exposed to was family-owned, sometimes private equity backed, and some publicly traded companies all across various industries that allowed me to develop the foundation of a broad skill set that has served me well.
I have nothing but immense gratitude for my time at PwC in addition respect for the countless individuals I was lucky to get to know and learn from while there. I do not know if there is a better environment than public accounting to learn foundational business skills and how to conduct yourself as a professional. You are moving around between multiple clients getting exposed to different businesses and different people constantly. If you have the right mentor(s) or coach(es), you will begin to understand what it means to create a personal brand and not just be Big Four employee number 1,000,376 or what not. My dad started at PwC way back in the eighties and he encouraged me to really pay attention to my clients’ businesses and what makes each company successful or unsuccessful. As an auditor you are not necessarily worried about that, especially not as an associate or a senior associate. But you're granted immense exposure to the inner workings of countless companies -- if you have the perspective to look left, look right, and talk to people about the business you can gain a solid foundation for business acumen that will pay off down the line.
The transition was a process for me. I tried for four of the five and a half years I was at PwC to get into transaction advisory services (“TAS”). The Houston office and other large markets were the only ones who had a transactions practice at that time. Prior to the pandemic unwinding the concept of needing to be physically located somewhere, TAS was only really offered in the major markets within the US (e.g., LA, NYC, Chicago). If you’re in one of those offices and a high performer, you can make the transition happen. So for me, being in Nashville, the path I needed to take was to be comfortable leaving PwC in order to get into TAS on the heels of potentially being promoted to manager.
One of my business professors at Baylor always talked about the importance of establishing and protecting a brand. When you leave the safety nest of the Big Four, you’re an extension of their brand but also its important to ask yourself…. “what are you going to do with it? And what is my brand?” It was a little scary, but I knew it was time for me to go and TAS was the area I needed to be in. I had amassed all of the foundational skills from PwC, so all that was left was to put them to work in the M&A space and try to build something that was my own. I interviewed with a number of firms in the Nashville market, from the Big Four down to regional/local accounting firms. The thought of not going to a “household name” or Big Four firm was a little terrifying, but I decided to bet on myself and find a more entrepreneurial opportunity.
Ultimately, the transition was fortuitous. A former PwC colleague connected me with a former Big Four Director who had just joined a large regional firm to start his own healthcare focused transactions practice. I joined him as his first hire at the end of 2016. I was blessed with a pretty unique opportunity to effectively be an apprentice to a TAS partner. My learning curve was steep and I was granted a long list of growth opportunities given my willingness to pay the price/work hard in my role.
Berkeley Research Group or BRG is a management consulting firm. It was started a little over 10 years ago, the core service offerings include corporate finance, disputes and damages and performance improvement/advisory services that operate across a number of industry verticals. The Firm was appealing to me given my focus on healthcare and their significant presence within that industry vertical. BRG has long offered a nationally recognized suite of comprehensive healthcare advisory and consulting services, which has been really beneficial for my own professional development over the past couple years.
Our bread and butter is a quality of earnings (QofE), where we’re effectively trying to analyze and determine a business’ normalized EBITDA, which is a proxy for free cash flow. QofE engagements are typically associated with some sort of a transaction, be it a merger, acquisition or recapitalization. I commonly use the analogy that we are like a home inspector for the financial health of businesses going through a transaction process. These engagements are traditionally done on the buy-side, but we’ve seen a real shift in the frequency of sell-side opportunities to jointly support of the seller and their advisor, most commonly an investment bank. In addition to QofE work, I also spend a portion of my time running other advisory projects for private equity firms or strategic clients. A few examples of those engagements include carve-out/synergy assistance, financial modeling, and integration planning processes. Broadly speaking, the QofE work is what pay the bills.
Conceptually, I’ve also thought of this as “Is it right” vs. “What does it mean”. Audit is a needed service that does it’s job well. Are the number close enough to right that people can sleep at night. TAS is digging deeper to the Why did the earnings do what they did… what decisions were or were not made to cause it… what will the business look like under different circumstances. That’s the exciting part of TAS, we don’t just check a compliance box… we actually learn about the business and add value to our clients.
Speaking more to the practical day-in/day-out… The skills you learn in audit are necessary to analyze a business for a potential transaction. The knowledge of accounting and understanding financial statements is directly transferable as well as understanding how to use/manipulate large data sets. One of a handful of distinct differences pertains to TAS engagements having a significantly lower materiality threshold (compared to an audit of a comparable business) due to the valuation methodology, which often is based on a multiple of adjusted EBITDA. So in an audit, you might not be as concerned about anything below $500,000 or $2,000,000 depending on the size of the company. But in a TAS engagement, a $100,000 income statement impact can become material when the deal is valued on a 10 to 15 times multiple as is common in various subsectors in healthcare.
Another distinct difference is the time period and consideration for potential future events that could impact the projected future cash flows of the business. We commonly refer to this as viewing changes and events on a timeline looking a few years backwards, but also understanding what the next 6-12 months may hold. Additionally, TAS requires more focus on the actual underlying business and understanding the key operational metrics. You’ve interviewed a number of folks in FP&A who discussed the relationship between financial statement metrics and the ultimate operations of the business. That is something that you've got to be much more attuned to in TAS, because someone is going to expect you to understand and communicate the story of a business as you uncover it throughout the course of each engagement.
Lastly, audit and TAS have some differences in scheduling. In audit you generally have a less variable and more systematic schedule. Four months out of the year, you are in busy season and going to disappear off the face of the earth or be hard pressed to find much free time. The other months, you're going to have some occasional busy periods, but broadly enjoy a less demanding work schedule. In TAS, you have a more project focused work schedule. TAS engagements generally have shorter timelines as projects are two to five weeks long, and then you're moving onto the next thing. TAS is a tremendous fit for my personality and my working style, as I prefer the challenge of learning/digging into a new business on that quicker cadence.
As I mentioned before, during the early years of my career I intentionally pursued a diverse set of experiences at the cost of potentially some depth in any one industry. I personally did not know what I would like most, so I figured it would be better to defer that decision until I found that calling or was expressly forced to make a decision. Healthcare was an area I hadn’t worked in at all until transitioning to TAS, but quickly realized there’s an enormous variety of businesses that operate within Healthcare beyond what most individuals commonly think of being exclusively hospitals and physicians enterprises. In addition, Healthcare is constantly evolving and changing due to the regulatory environment and amount of disruption opportunities exist to improve outcomes/patient care. Again, for my personality, it was and is the perfect area for me to focus on and invest my time.
Two of the biggest things I have learned are (1) the importance of a good team and (2) having mentors and coaches who proactively advise and support you.
Firstly, a strong team allows for the whole puzzle of a project to come together in a high-quality manner. Through developing our people and coaching them up, we’ve been able collectively set a standard for quality of work that everyone buys into from the managing directors down to the associates. That is incredibly powerful and important, as you encountered challenges or speed bumps everyone is committed to that standard being met one way or another. Consequently, you also help your team members to grow, develop and achieve their own professional goals, which is remarkably fun and rewarding.
Secondly, mentors help to support you emotionally, intellectually, and even politically within an organization. Work can be a grind no matter how much you love a job, those tough days are going to come around. Knowing that you have someone to support and advise you when you are going through certain periods is immensely valuable. The other side of that coin is that you must be your own advocate in your career. It helps to have those people, but ultimately, it's up to you to communicate what you want so someone can help you get there. You are going to get respect and benefits to the extent that you're willing to pursue those relationships and advocate for yourself.
Hopefully this doesn't come off as conceited, but I want to be the very best in what I do or at least as close as I can be to that level. In essence, try to reach my potential by stewarding the skills and knowledge that I have been blessed with. That probably fuels me to work more than I should sometimes, but it is not really something I can simply turn off. My approach has long been that I’m going to work tirelessly to make sure that when my client thinks about me or the Firm that employees me that they have overwhelmingly positive thoughts and commentary. I commonly refer to this with my teams as “concierge” level service. 24/7/365. I am always trying to move the bar closer to whatever the best is. I don't know where the end of that spectrum is and I recognize there will always be someone better than me, but I’m certainly not going to make it easy for that person to stay on top.
I am still trying to find that balance some days. When you do not have kids and you're not married, you don't really care about it as much. There is less competition for your time. But eventually you get to the point where your 24 hours are completely booked. There are no more open windows to spend an extra hour doing something where it is not going to come at the cost of something else. As I mentioned before, I want to be the best in what I do, and that includes being a great husband & father. So even when the deadline is upon us, I make a point to get home to the family for a few hours before knocking out whatever work needs to be completed for the night. Those tight timelines aren’t going away but taking ownership of my schedule and training / relying on the team allows for the balance that I need. To the extent you have a highly talented team that drive to be the best can collectively be a shared goal and accomplished together.
The first person that comes to mind Jason Kasper, who I met at PwC. We both worked in audit, went to the same church, and just really got to know each other well. He is now doing management consulting for Deloitte. He and I have always been a resource to each other. We pressure test or sanity check various decisions, getting input from an objective third party. He has been an invaluable resource to me. The other person I turn to is my current managing director, John Brock. The two of us have built this healthcare practice starting in January of 2017, so we have spent a lot of hours together over the years. He certainly has been a mentor, both professionally and personally to me. Whenever I go to him with questions, he consistently gives me a very objective and candid answer around what he would suggest and how to handle something. You don’t often find that in the work setting with a superior, which makes the work all the more rewarding.
I am figuring that out more each day. I personally need to be involved in an ever-changing professional environment. I like researching, learning, and interacting with a diverse group of people. Professional services has long been a great fit for me in those respects. So I’m planning to continue to grow professionally and expand my role within this practice to see where that takes me. I think we have got something pretty special going on with my colleagues at BRG.
That’s not to say I lack alternative ambitions or interests, my wife commonly pokes fun at my growing list of potential career pivots… college professor at Vanderbilt at some point… pivot to a corporate development role and work toward a CEO or COO role one day… As I said, I'm definitely immensely enjoying where I'm at and the trajectory that I'm on. I have tried to set myself up to have a thick keyring such that I can open any number of doors that may present themselves over the coming years.