The accounting profession in the US is undergoing a significant transformation, with private equity firms looking to acquire stakes in some of the largest accounting firms in the country. Following the successful sales of Grant Thornton and Baker Tilly earlier this year, at least ten of the top 30 accounting firms could soon be in private equity hands. This wave of acquisitions is expected to dramatically increase private equity’s influence over the accounting profession.
Atlanta-based Aprio is one of the top 30 firms planning to sell a majority stake to private equity firm Charlesbank Capital. Additionally, New York’s PKF O’Connor Davies and Alabama’s Carr, Riggs & Ingram have engaged bankers to run sale processes. California-based Armanino, the country’s 19th largest accounting firm, is also in talks with a private capital provider to sell a minority stake. These developments highlight the increasing trend of private equity investment in accounting firms.
The influx of private equity investment in accounting firms can provide partners with financial windfalls and the potential for capital appreciation through ongoing stakes. However, regulators have expressed concerns about how private equity ownership could impact the “tone at the top” of accounting firms and potentially affect the quality of their audit work. It is essential for firm leaders to be mindful of the potential implications of private equity ownership and address any misimpressions that may arise.
Private equity groups have shown enthusiasm for investing in the accounting sector, with notable deals such as New Mountain Capital’s acquisition of a majority stake in Grant Thornton for $1.4 billion. The robust appetite from the loan market for debt refinancing of Grant Thornton’s liabilities demonstrates the growing interest from private capital providers in the accounting profession. This trend is expected to continue as private equity investment becomes more prevalent in firms of all sizes.
Firms such as Carr, Riggs & Ingram, PKF O’Connor Davies, and Aprio are actively pursuing potential deals with private equity investors. Carr, Riggs & Ingram, with revenues of $455 million, has narrowed down potential investors to a field of three, while PKF O’Connor Davies, with annual revenues of $380 million, has engaged Capstone Partners to run its sale process. These developments underscore the increased interest from private equity in acquiring stakes in top accounting firms.
Overall, the rise of private equity investment in the US accounting profession is reshaping the landscape of the industry. Partners have the opportunity to leverage capital markets for growth and potentially benefit from financial gains. However, it is essential for firm leaders and regulators to monitor the impact of private equity ownership on firms’ operations and audit quality. As more accounting firms consider private equity investment, the future of the profession will likely be shaped by these strategic partnerships.
Discussion about this post