Private equity firm New Mountain Capital LLC is taking a majority stake in Top 10 Firm Grant Thornton LLP in the biggest deal to come along in PE firms' involvement in the accounting field.
The amount of the investment was not disclosed by Grant Thornton or New Mountain, but it was reportedly a majority stake, according to the
After the close of the transaction, which is expected in the second quarter of the year, Grant Thornton will operate in an alternative practice structure, with Grant Thornton LLP, a licensed CPA firm, providing attest services, and Grant Thornton Advisors LLC providing business advisory and non-attest services. The deal involves Grant Thornton's U.S. firm, not the broader Grant Thornton International network.
"Our partnership with New Mountain Capital empowers Grant Thornton to deliver transformational, high-quality outcomes for our clients, our talented team members and the industry as a whole," said Grant Thornton CEO Seth Siegel in a statement Friday. "The investment immediately enhances our value in the marketplace and enables us to accelerate our current strategy. We'll enjoy greater scale, resources and agility, while better positioning the firm to make targeted investments in talent, technology, infrastructure and enhanced capabilities. Grant Thornton will further solidify our position as the industry's platform of choice."
Grant Thornton, based in Chicago, ranked No. 7 on Accounting Today's 2024 list of the Top 100 Firms, with over $2.36 billion in annual revenue. The firm reported that it generated record revenues for its fiscal year ending July 31, 2023.
"We have been deeply impressed by the Grant Thornton team, and in our research, Grant Thornton ranked at the highest levels in the U.S. as measured by the quality of its work product and the satisfaction of its clients, even at a much lower price to clients," said Andre Moura, managing director at New Mountain Capital, in a statement. "Grant Thornton's unique culture drives the exceptional service the firm provides its clients, and we look forward to working with Grant Thornton to invest further in technology and automation, talent and new service line capabilities to achieve rapid growth — while maintaining an unwavering focus on quality and client experience."
Koltin Consulting Group CEO Allan Koltin advised New Mountain Capital and Citrin Cooperman on their combination in October 2021, but was not involved in the new deal. "The Grant Thornton deal with New Mountain Capital is another exclamation point on why the accounting profession and private equity are combining forces," he told Accounting Today. "Grant Thornton might be the largest CPA firm deal to date, but trust me — other Top 25 CPA firms will follow, including some of the largest in the world. New Mountain Capital hit a grand slam home run on its investment in Citrin Cooperman, so no surprise here that they entered into a second deal in the accounting industry."
GT CEO Siegel cited Grant Thornton's upcoming 100-year anniversary as a companion milestone to its partnership with New Mountain Capital.
"We take great pride in our many accomplishments over the past century, and partnering with New Mountain Capital will ensure that we fully capitalize on the compelling opportunities that will define our next century," he stated. "They share our standards and our vision, and together we will reshape the industry landscape, while enhancing Grant Thornton's value proposition for our full range of stakeholders."
More large firms have been accepting private equity investments in recent years, and just last month Chicago-based
Private equity firms are increasing their investments in accounting firms for several reasons, according to one expert.
"There is a strong need for public accounting firms to invest today in technology enablement that will drive more efficient auditing processes going forward," said Chris Clapp, who leads CrossCountry Consulting's national private equity practice. "By bringing in private equity capital, and utilizing private equity capital to drive those investments, that is more favorable than utilizing the partnership model of distributing those earnings to the partners, which makes it much harder to be able to invest in the partnership model."
"If you think about the partnership compensation model, it's very much set up to financially reward partners who remain with the business for the long term to reap the benefits of the pension," he continued. "Well, the reality is a lot of the workforce today, the younger partners today, are probably a little bit less incentivized by the pension model. The idea of working for 30 years for long hours, grinding through it and then being able to reap those benefits is less attractive. If you look at a private equity situation, every five years those partners would be going theoretically through equity events, which would provide them the opportunity to take chips off the table, or be able to participate in the exit of those businesses and then roll them forward into the next one, really pulling forward a lot of those earnings, versus having to defer it until they start to receive pension payments."
