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The US arm of accounting firm Grant Thornton has agreed to sell a majority stake to the investment group New Mountain Capital, in the largest of a wave of private equity deals that are reshaping the sector.
The deal, which would be New Mountain’s second investment in a US accounting firm, was announced to Grant Thornton’s nearly 10,000 staff on Friday, according to people familiar with the matter.
It comes weeks after smaller rival Baker Tilly agreed a $1bn cash infusion from private equity group Hellman & Friedman to fund an acquisition spree, and is likely to further intensify competition in a sector that has been fast expanding beyond traditional tax and accounting into consulting services.
Chicago-based Grant Thornton is the seventh largest accounting firm in the US after the Big Four, RSM and BDO, with $2.4bn in revenue in its past financial year, which ran to July 2023.
The financial terms of the investment could not immediately be established, but it will be the largest of five private equity deals so far among the top 25 US accounting firms, where the traditional partnership model is increasingly being called into question. Advocates of private equity say it can be used to boost growth and introduce a more compelling incentive structure for partners and staff.
The cash from New Mountain, together with some debt financing, will be used to return capital to current partners, buy out retirement obligations to former partners and build a war chest for investment, according to people familiar with the plans. As well as spending on technology and new service offerings to clients, Grant Thornton could also step up acquisitions, an area where it has historically been less active than many rivals, the people said.
The firm has about 600 partners in the US and is the largest member of Grant Thornton International, a network of accounting firms that use a common brand and co-ordinate services worldwide.
“We’ll enjoy greater scale, resources and agility, while better positioning the firm to make targeted investments,” said Seth Siegel, Grant Thornton’s chief executive.
Three top-25 firms that have already closed private equity deals — EisnerAmper, Citrin Cooperman and Cherry Bekaert — increased revenues between 38 per cent and 100 per cent last year, compared with an average growth rate of 18 per cent across the top 25, according to Accounting Today.
New Mountain bought a controlling stake in Citrin Cooperman in 2022 and has helped fund an acquisition spree that has swelled the accounting firm’s annual revenues to an estimated $700mn. Grant Thornton and Citrin Cooperman will continue to operate independently of each other, according to people familiar with the plans.
New York-based New Mountain, which manages about $50bn in assets, is known for preferring to buy privately held businesses in sectors it believes are insulated from swings in the economy. It boasts that it has never had an investment go bankrupt or miss an interest payment in more than 80 private equity deals executed since it was founded in 2000.
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