Ryan Bunn (Reference Equity) has a public proposal for CBIZ ($CBZ): stop buying back stock at 9x earnings and restart the M&A flywheel that compounded revenue at 13%/year and took EBIT margins from 9% to 14% over the last decade. For someone like me who has always been a sucker for share buybacks, "stop the buybacks and issue equity" lands like a knife right in the gut, so I make him defend every piece of it.

We get into whether the $2.3B Marcum deal (the largest accounting acquisition ever, with the stock down ~70% since) deserves a mulligan, whether the multiple got crushed by 3.4x leverage or by AI headline fear, whether AI lets the Big Four come downmarket and eat CBIZ's middle-market lunch (or lets superstar producers hang their own flag), and whether long-term investors would really put primary equity onto the balance sheet at no discount. Ryan's math: the market prices credit risk, small 6-9x EBITDA bolt-ons restart the compounding machine, and a delevered, re-rated CBIZ has 100%+ upside.

Ryan's Restarting the Flywheel site (proposal + deck): https://cbizflywheel.com/

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Chapters:

(0:00) Intro: an activist pitch to STOP the buybacks

(1:15) AlphaSense

(2:31) What is CBIZ ($CBZ)?

(5:01) Ryan's proposal: restart the M&A flywheel

(7:44) Buybacks at 9x earnings vs. getting back to M&A

(10:38) Post-Marcum, are there even deals left to do?

(12:52) The AI risk: offshoring and the Big Four coming downmarket

(19:24) Does AI let superstar accountants hang their own flag?

(23:41) The Marcum deal: mulligan or strategic masterstroke?

(28:59) Private equity competition and winner's curse

(31:38) Valuation: 9x free cash flow at 3.4x leverage

(40:00) Does delevering actually re-rate the stock?

(45:47) Management, the board, and alignment

(49:58) Why issue equity now? The FMC example

(56:57) Ryan's real ask: end the muddled capital allocation

(57:38) Wrap

Ryan Bunn / Reference Equity: https://cbizflywheel.com/

Links:

Yet Another Value Blog - https://www.yetanothervalueblog.com

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Production and editing by The Podcast Consultant - https://thepodcastconsultant.com/