S. County Niche Auditor to Sell for $70 Million

An Atlanta auditing firm said Tuesday it plans to buy Loder, Drew & Associates Inc., a San Juan Capistrano-based audit company that has become successful by helping businesses boost their bottom lines.

Profit Recovery Group International Inc. said it will pay $70 million in cash and 803,535 shares of unregistered and restricted stock to buy Loder, Drew in a deal that could close by the end of the month.

Based on the price of Profit Recovery’s stock, which closed Tuesday at an all-time high of $32.63 a share, the shares for Loder, Drew would be valued at more than $26 million. Profit’s stock was up $4.31 a share for the day in Nasdaq trading.

Loder, Drew could receive up to another $70 million, depending on its future performance.

The combination will create a major player in a growing niche market in the accounting industry. These companies are hired to analyze corporate expenditures and find ways to plug leaks and suggest other ways to cut costs.

Auditors may find instances in which the client has paid twice for a service or failed to take advantage of a discount or rebate, for example. Contracts are also scrutinized.

Even heavyweight accounting firms such as Deloitte & Touche are entering the field. Deloitte has formed a unit, Costa Mesa-based Integrated Cost Reduction Strategies, aimed at helping clients increase their bottom lines.

Most of Profit Recovery’s clients are in the retail, wholesale and government sectors, while Loder, Drew’s customers are concentrated in industries such as manufacturing and financial services.

The acquisition would significantly further the expansion of Profit Recovery, which over the past year has purchased about half a dozen companies that provide similar services for a variety of industries.

With revenue of $112 million last year and 1,300 employees in 18 countries, Profit Recovery bills itself as the world’s largest recovery auditing firm.

Loder, Drew, which has 212 employees, “gives us a significantly broader coverage of the manufacturing and other non-retail markets,” said John Cook, Profit Recovery’s chief executive.

Loder, Drew, which was founded in 1985, had sales of $22 million last year and expects revenue to hit $40 million this year, said H. Richard Byrne, chief operating officer.

No layoffs are planned at Loder, Drew, said Gene Ellis, Profit Recovery’s chief financial officer.

Founder and Chief Executive Ronald K. Loder, along with Byrne, will stay with the company in their current positions. Loder will join the parent company’s board.

Profit Recovery said it has secured a commitment from NationsBank, N.A. for a $125-million credit line that will be used for the Loder, Drew acquisition, which must still be approved by regulatory agencies and both company’s boards of directors.

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Audit Firm Deal

Profit Recovery Group International Inc. has agreed to acquire Loder, Drew & Associates, a San Juan Capistrano firm, for $70 million in cash, plus stock. A glimpse of both companies:

PROFIT RECOVERY GROUP INTERNATIONAL

Headquarters: Atlanta

Chairman/CEO: John Cook

Business: Conducts audits to recover excess payments and determine ways to cut costs.

Concentration: Retail, wholesale, government and health care

Employees: 1,300 in 18 countries

1997 revenue: $112 million

1997 net income: $9.6 million

Status: Public

Exchange: Nasdaq

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LODER, DREW & ASSOCIATES

Headquarters: San Juan Capistrano

President/CEO: Ronald K. Loder

Business: Conducts audits to recover excess payments and determine ways to cut costs.

Concentration: Manufacturing, financial services, other non-retail

Employees: 212

1997 revenue: $22 million

Projected 1998 revenue: $40 million

Status: Private

Purchase price: $70 million, plus 803,535 shares of unregistered, restricted stock

Source: Bloomberg News

Researched by JANICE JONES DODDS / Los Angeles Times