Ryan LLC, a Dallas-based global firm that specializes in business taxes, is acquiring VAT Systems, a Paris-based provider of international value-added tax compliance and recovery services.
The acquisition is expected to bolster Ryan’s presence in Europe. The firm recently announced a $317 million investment from private equity firm Onex Corporation (giving Ryan a value of $1.1 billion), and the VAT Systems deal is another strategic acquisition in Ryan’s drive to become the world’s leading global brand in tax.
“The firm has been involved in Europe for about the last seven years in the VAT consulting and recovery business,” Ryan LLC chairman and CEO Brint Ryan told Accounting Today. “We have offices in London, Amsterdam and Budapest. That’s been a very successful business for us. In the course of growing and building that business, we’ve been frequently asked to provide VAT compliance services. We first started working with VAT Systems about four or five years ago in more or less a referral relationship. We would send them clients that ask about VAT compliance. In the meantime, here in North America, we have been building some very successful compliance businesses in a number of areas, including property tax and sales tax and severance tax, so it was just a natural fit for us. We saw a big opportunity to help [VAT Systems CEO] Andreas [Kozanitis] grow the business, expand it, bring it up-market a little bit and that’s why we made the acquisition. We’re excited about the opportunity to be more of a full VAT service provider in Europe as a result of the VAT Systems acquisition.”
The acquisition will help fuel Ryan’s global growth prospects by adding services for multinational business clients who operate in Europe and any region that use VAT. In the European Union, there are different sets of tax rules for each jurisdiction, and the frequent changes in tax regulations in the EU and other parts of the world make it difficult and expensive for many companies to operate. Potential penalties for noncompliance can lead to additional VAT costs of up to 20 percent of the cost of goods or services, and interest and penalties of up to 100 percent of due VAT, which can be assessed up to 5 years after the taxable transaction.
VAT Systems offers proprietary software to help clients reduce their tax liability, recover capital, and stay in compliance in the EU and other parts of the world. Ryan views the strategic acquisition as a way to build the largest indirect tax practice in North America and Europe for a portfolio of corporate clients worldwide.
Financial terms of the acquisition were not disclosed. “Here’s what I can tell you,” said Ryan. “They provided full VAT compliance services for somewhere between 550 and 600 clients on an annual basis. Their work involved over 50 countries, and they’ve billed and performed work over the last three years for about 1,000 clients. There’s roughly 100 employees in the business, principally located in Paris and also their office in Portugal. This will roughly double the size of our business in Europe. We see Europe and Asia Pacific as really big growth opportunities for us in the tax services space.”
Last year’s tax overhaul in the U.S. has helped the firm grow domestically. “Although that doesn’t directly impact the VAT compliance market, it certainly has raised awareness from companies all over the world about international tax issues,” said Ryan. “We have a separate international income tax compliance unit based here in the U.S., and obviously tax reform has been a big growth factor for that practice, but I think overall the new tax law has raised awareness of international tax across the board.”
The VAT systems acquisition is the second since the Onex investment, after a recent acquisition of Economics Partners, a transfer pricing business based in Denver. Ryan plans to do many more acquisitions in the future with the extra capital provided by Onex.
“The investment thesis behind the Onex deal was growth capital," he said. "The purpose of that transaction was to provide additional capital for growth, and our plan is to accelerate our M&A activity over the next couple of years. We had been averaging two to three acquisitions annually. We hope to increase that to five to six annually going forward, and Onex is a big part of the funding of that strategy. Our strategy is to be full service in all of the markets that we practice in, and this is going to be a big step toward helping us accomplish that in Europe.”
