Mid-tier accounting firms have found new paths to finance their growing needs. Last November, US accounting firm Forvis purchased the US unit of French Mazars to create a robust audit and advisory network. A few months earlier, BDO turned to an employee stock ownership plan to foster employee recruitment. Earlier this year, Chicago-based Grant Thornton recently sold a stake in the firm to private equity fund New Mountain Capital to invest more quickly in technology and personnel. Grant Thornton expects to attract bigger corporate customers, who, in the past, only worked with the Big Four accounting firms (Deloitte, EY, KPMG, PwC).
The traditional partnership structure has reached its limits: It is capital-constrained. Much of the profits go back to partners each year, and the company has retirement obligations for former partners. At the same time, accounting firms must heavily invest in artificial intelligence tools to deepen their consulting business and grow profits.
Sensing opportunities for consolidation, private equity (PE) firms have purchased shares in five of the top 26 US accounting firms in recent years. Tower Brook Capital invested in advisory and accounting expert EisnerAmper. New Mountain Capital took an interest in Citrin Cooperman, and Parthenon Capital got involved with Cherry Bekaert.
In February 2024, Baker Tilly US signed a $1 billion deal with Hellman & Friedman and Valeas Capital Partners. Shortly thereafter, the American branch of Grant Thornton, the world’s seventh-largest accounting firm, announced an investment by New Mountain Capital. These financial alliances have proven beneficial, as seen in the case of Citrin Cooperman, which has completed 17 acquisitions since New Mountain Capital’s capital injection, to become a $600 million powerhouse. PE firms’ appetite for accounting firms is not limited to the US. It has a global reach, as seen in the UK, where Hg and PAI Partners are now shareholders in Azets, one of the top 10 UK accounting firms. Azets, in turn, has acquired 90 local providers. Waterland Private Equity took stakes in two other UK accounting firms, Moore Kingston Smith and Cooper Parry