"The past 12 months have been busy as we have seen a significant amount of new company formations, which require accounting, tax advisory and structuring support."
Can you give an overview of EisnerAmper’s activities and performance in the life sciences sector over the past year?
The life sciences division is the leading industry vertical for our public company practice, more specifically for companies that are going through IPO or secondary offerings. The past 12 months have been busy as we have seen a significant amount of new company formations, which require accounting, tax advisory and structuring support. We have also seen many companies going through significant M&A transactions and/or preparing for IPOs. In Q4 of 2021 alone, we had four clients go public, which was extremely exciting. The largest growth engine for us is the capital markets, and if they stay strong, it will be greatly beneficial to our business moving forward.
EisnerAmper has added capabilities to its portfolio, including grant accounting capabilities in our South Florida office; managed services, which allow virtual companies to have a managed services computer solution; and outsourced accounting capabilities in San Francisco through acquiring Keating Consulting Group, which provides outsourced financing and accounting services to venture-backed companies. We continue to increase our geographical footprint.
We aim to become more visible and reach all the life sciences communities in the areas where we operate. We support universities and their entrepreneurial programs, and regularly speak at various events, accelerators and incubators, encouraging entrepreneurship.
How characterizes entrepreneurs that successfully form companies and IPOs?
They mostly gain their experience in larger organizations, and start their own companies from the experience and lessons learned. From a public company perspective, credibility is critical, and we are seeing this even more so in the venture capital community. At the early stage of investment, if you are not able to secure a significant venture capital round it will be very difficult to do so at a later stage, as there is a significant volume of companies with interesting ideas, and investors are going to the sources they feel are most likely to succeed. There are too many prospects to completely evaluate, and investors are limiting their efforts to those they think are going to have the greatest opportunities.
What advice would you give first time entrepreneurs?
Finding a strong partner to help supplement skill sets is extremely important. For example, if it is a scientific founder, finding a partner with business development expertise can be critical. At a very early stage, companies do not necessarily have the funds to bring such a person on board, but we have seen creative deals where the company is able to share some equity, most often a future equity arrangement and maybe a promise of employment when the company is funded. There are also public and private incubator groups that help early-stage companies complete their management teams and skill sets by using an outsource model.
What can we expect to see in the M&A and IPO landscape moving forward?
The IPO markets have certainly tightened with a bit of a slowdown in the process. There is still a substantial amount of money to be spent, some deals are still getting done, and a lot of companies are in the queue to go into the public marketplace. There has been pressure on biotech stock, and some of the recent vintage biotech IPOs are trading well below their IPO price. This is not a great sign for the industry as a whole, but there is still cautious optimism for what the markets are going to look like for at least the first part of 2022.
If there was one thing you could change in the Tax Act that would help people across the board, what would it be?
An expansion of the R&D credit, which will help innovative companies attract more capital to allow them to determine if their science is worthwhile.
Which services have been in most demand and driving growth for EisnerAmper?
Support for IPOs and SPACs—whether they be tax, auditing or consulting clients—has been in significant demand. EisnerAmper has seen substantial growth in its tax services division, with demand coming especially from clients that have an international aspect to their businesses. We are also supporting companies regarding ownership and the tax ramifications surrounding shares and stock options, especially as companies are growing and thinking about what an exit might look like.