With over 1,500 employees in international locations, over 250 employees and 40 partners dedicated to the financial services practice, EisnerAmper LLP has the breadth to handle global engagements and provide comprehensive guidance and support to its roster of hedge fund clients.
EisnerAmper currently services over 1,300 hedge funds and 200 private equity/venture capital sponsors. Whomever the client, the firm always strives to speak their language and avoid using technical accounting jargon.
Nick Tsafos (pictured), Audit Partner in EisnerAmper’s New York office and Chairman of EisnerAmper Global, notes that the firm’s private equity clients saw a continued increase in their funds last year among global investors, reflecting the wider market demand for private equity funds.
Tsafos notes that with market multiples so high it is getting harder for managers to find the right investment opportunities but in his view, what the market is not doing is pricing in the efficiencies that technologies have created on an invested company’s financial statements.
“The way we measure productivity has to change to better reflect what companies are really doing,” says Tsafos. “If a company has created software or infrastructure that makes their operations more efficient, you’ll see it on the top line in terms of higher profitability, but the cost of that technology is nowhere reflected on the balance sheet; you’re not seeing that value-add on the balance sheet.
“When PE managers go in to price a company they aren’t necessarily getting the full value coming across in the financial statement. Some managers are adjusting to that fact.”
One of the clear trends that Tsafos has noticed over the last couple of years, and which the regulators are becoming more active over, is for PE managers to provide greater transparency on fees and expenses.
As an auditor, Tsafos says that whenever he is attending industry conferences, the most popular question he gets asked is: ‘How do you check to see if an advisor is receiving fees directly from an investee company in accordance with the fund’s offering documents?’
“Limited partners want that transparency,” says Tsafos. “We do have some funds where if they receive fees from an investee company they will offset them against the management fee.
“Also we have some funds that have no such clauses in their offering documents and there is no offset and the general partner is able to take fees from both sides. It will depend on what has been disclosed in the LPA but investors are becoming increasingly aware of the fees and expenses issue and are looking for more transparency from general partners. And the smart GPs in the marketplace are providing that transparency.”
Another key trend that has been shaping the market for some time is the increased use of co-investment vehicles. If an investor wants to do a co-investment deal, Tsafos says the only complexity, when it comes to doing a financial audit, is whether the investor wants audited financial statements for that co-investment.
Provided that the terms of the investment in that investment company are the same as those used in the commingled fund, he says the valuation that is used for the investment company will be the same as that used in the commingled fund.
“However, if the fund has ratchet rights and the co-investment vehicle does not, the valuation has to change,” explains Tsafos.
On winning this year’s award, he comments: “We’re thrilled to have won this award. There’s no better acknowledgment of our team’s painstaking efforts than winning this award based on service excellence from one’s clients and peers.”
