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The US arm of accounting firm Grant Thornton has agreed to sell a majority stake to investment group New Mountain Capital, in the biggest wave of private equity deals reshaping the sector.
The deal, which will be New Mountain's second investment in a U.S. accounting firm, was announced to Grant Thornton's nearly 10,000 employees on Friday, according to people familiar with the matter.
It comes weeks after smaller rival Baker Tilly agreed to a $1 billion cash infusion from private equity group Hellman & Friedman to finance a takeover, and is likely to intensify competition in a sector that is rapidly expanding beyond traditional tax and accounting into advisory services. .
Chicago-based Grant Thornton is the seventh-largest accounting firm in the United States after the Big Four, RSM and BDO, with revenue of $2.4 billion in its last fiscal year, which ran through July 2023.
The financial terms of the investment could not immediately be determined, but it will be the largest of five private equity deals to date among the 25 largest US accounting firms, as the traditional partnership model has increasingly come into question. Private equity advocates say it can be used to boost growth and introduce a more compelling incentive structure for partners and employees.
The cash from New Mountain, along with some debt financing, will be used to return capital to existing partners, buy out the pension liabilities of former partners and build a venture fund to invest, according to people familiar with the plans. In addition to spending on technology and new service offerings for clients, Grant Thornton could also ramp up acquisitions, an area in which it has historically been less active than many competitors, the sources said.
The firm has about 600 associates in the United States and is the largest member of Grant Thornton International, a network of accounting firms that use a common brand and coordinate services around the world.
“We will enjoy greater scale, resources and flexibility, while putting the company in a better position to make targeted investments,” said Seth Siegel, CEO of Grant Thornton.
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Three of the 25 largest companies that have already closed private equity deals — Eisner & Copperman, Citrin Cooperman, and Sherry Picard — increased their revenues between 38 percent and 100 percent last year, compared with an average growth rate of 18 percent across the 25 largest companies. According to Accounting Today.
New Mountain bought a controlling stake in Citrin Cooperman in 2022 and helped finance an acquisition that swelled the accounting firm's annual revenue to an estimated $700 million.
New York-based New Mountain, which manages about $50 billion in assets, is known to prefer to buy privately owned companies in sectors that it believes are insulated from fluctuations in the economy. It prides itself on having never had an investment go bankrupt or default on interest payments in more than 80 private equity deals executed since its founding in 2000.
