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Private Equity Groups Poised to Own One in Three Top US Accounting Firms
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Ten of the 30 largest U.S. accounting firms could soon be in the hands of private equity, according to people familiar with the negotiations, as at least four groups hold talks about a deal following this year’s sales of Grant Thornton and Baker Tilly .
Acquisitions by financial buyers of these two top companies by revenue have opened the floodgates for other deals, the people said, positioning private equity to increase its influence over the United States. accounting profession dramatically.
One of the top 30 companies, Atlanta-based Aprio, was planning a deal to sell a majority stake to private equity firm Charlesbank Capital, according to people familiar with the situation.
Two others — New York-based PKF O’Connor Davies and Alabama-based Carr, Riggs & Ingram — have hired bankers to conduct sales processes, they said.
California-based Armanino, the nation’s 19th-largest accounting firm according to Accounting Today, was in talks with a private equity provider about selling a minority stake, the people said. Armanino made headlines as an auditor of North American operations FTX crypto exchangewhich collapsed in 2022.
The wave of deals sweeping the profession means that one in three of the top 30 companies has made, or is close to making, private equity investments.
“Partners are waking up to the fact that leverage can be gained by tapping into the capital markets,” said Alan Whitman, former chief executive of Tilly Baker. “Companies’ capital needs have increased exponentially in recent years, in terms of personnel costs and investments in offshoring and technology.”
Deals can also mean windfalls for partners and the prospect of capital appreciation through their continued holdings.
But regulators have expressed concern about whether private equity ownership could change the “tone at the top” of accounting firms and affect the quality of their audit work. Paul Munter, chief accountant at the U.S. Securities and Exchange Commission, said last month that “company leaders need to be sensitive to the message such agreements can send and be ready to correct any misimpressions.”
Private equity groups entered the accounting industry with enthusiasm. New Mountain Capital’s acquisition, with two co-investors, of a 60% stake in Grant Thornton for US$1.4 billion was its second agreement in the sector. Grant Thornton bosses resolved a dispute with former partners about retirement benefits and acquisition closed last month.
There was also strong loan market appetite for a $1.9 billion debt sale to refinance Grant Thornton’s liabilities, priced at an interest rate 325 basis points above the Sofr benchmark, according to a person familiar with the sale.
“Private capital is penetrating the accounting profession in ways we never thought possible,” said Allan Koltin, a business consultant to accounting firms. “This is entering the lineage of companies of all sizes.”
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Carr, Riggs & Ingram, which had revenue of $455 million last fiscal year, narrowed potential investors to a field of three after the initial offering deadline last month, according to people familiar with the situation. The business process is being managed by investment bank William Blair.
PKF O’Connor Davies, whose annual revenues Accounting Today estimates at $380 million, has hired Capstone Partners to execute its sale process, the people said. Aprio, with annual revenues of US$420 million, used the Falcon consulting group.
Charlesbank, Aprio and Armanino declined to comment. Carr, Riggs & Ingram and PKF O’Connor Davies did not return messages seeking comment.