Mid-market accounting firms have found new ways to finance their growing needs. Last November, the American accounting firm Forvis bought the American part of the French Mazars to create a robust audit and advisory network. A few months earlier, BDO turned to an employee stock ownership plan to boost employee recruitment. Earlier this year, Chicago-based Grant Thornton recently sold a stake in the company to private equity fund New Mountain Capital to accelerate investment in technology and personnel. Grant Thornton expects to attract larger corporate clients, who in the past only worked with the Big Four accounting firms (Deloitte, EY, KPMG, PwC).
The traditional partnership structure has reached its limits: there are capital constraints. A large portion of profits are returned to partners each year and the firm has pension obligations for former partners. At the same time, accounting firms must invest heavily 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 26 largest U.S. accounting firms in recent years. Tower Brook Capital invested in consulting and accounting expert EisnerAmper. New Mountain Capital took a stake in Citrin Cooperman and Parthenon Capital became involved with Cherry Bekaert.
In February 2024, Baker Tilly US signed a $1 billion deal with Hellman & Friedman and Valeas Capital Partners. Shortly afterwards, the US branch of Grant Thornton, the seventh largest accounting firm in the world, announced an investment by New Mountain Capital. These financial alliances have proven useful, as evidenced by the case of Citrin Cooperman, which has completed 17 acquisitions since New Mountain Capital’s capital injection, becoming a $600 million powerhouse. PE firms’ interest in accounting firms is not limited to the US. It has a global reach, as evidenced in Britain, where Hg and PAI Partners are now shareholders in Azets, one of the ten largest UK accounting firms. Azets, in turn, has acquired 90 local providers. Waterland Private Equity took stakes in two other British accounting firms, Moore Kingston Smith and Cooper Parry
