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Grant Thornton’s retired US partners are demanding a greater share of the spoils from its sale of a majority stake to private equity, after accusing the accounting firm’s management of short-changing them on their pensions.
Some of the 350 former partners entitled to retirement benefits from the firm reacted with anger after being told the payments would be replaced with a one-off lump sum when the deal with New Mountain Capital closes in May, according to people familiar with the matter.
After a fractious call with Grant Thornton’s management last week, retirees said the sum they were offered was unfairly low, in some cases coming up short by $1mn or more. A group of retired partners, including three former chief executives, are negotiating with the current leadership to try to get a better deal.
Grant Thornton is the seventh-largest accounting firm in the US with $2.4bn in annual revenue. The sale of a majority stake to New Mountain represents the biggest private equity deal in the sector. Advocates say private equity can bring more efficiency to the profession and access to capital for critical investment, but the financial terms of such deals can prove controversial. Retirees are typically among the firms’ largest creditors but do not have a vote on the sale of the firm.
Grant Thornton has not publicly disclosed how much New Mountain is paying for its stake, or how exactly the firm will distribute the proceeds of the investment and the new debt that it will also take on. As well as paying off obligations to retirees, the new structure involves repaying capital to current and former partners.
People familiar with the retirees’ dispute said it centred on a discount rate being used to calculate the lifetime value of the partners’ retirement benefit. Some retirees also argued that mortality assumptions had been picked to lowball the buyout offer. In addition, there are negative tax implications from getting the benefit in one lump sum, the retirees have said.
One person said there was a lack of trust between the former partners and members of the current leadership team, and “this is not the Grant Thornton that we were hired into”.
A Grant Thornton spokesperson said the firm “deeply values the contributions of our retired partners. We have been speaking with them and look forward to addressing any questions they may have.”
A dozen former partners, including ex-chief executives Brad Preber, Ed Nusbaum and Mike McGuire, have formed a group to “act as a point of contact” with the firm, according to an email it sent to retirees this week.
The group spoke to current chief executive Seth Siegel on Tuesday “to outline the serious concerns we have heard from you regarding the payment of our retirement benefit”, according to the email, which added: “While we continue to explore other options, we will wait for Seth and his leadership team’s response before further reaction.”
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