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Ten of the top 30 U.S. accounting firms could soon fall into the hands of private equity, as at least four groups are in deal talks following the sales of Grant Thornton and Baker Tilly this year, according to people familiar with the negotiations.
The acquisitions by financial buyers of the two top 10 firms by revenue opened the floodgates to more deals, dramatically increasing private equity’s influence over the U.S. accounting profession, the people said.
One top 30 firm, Atlanta-based Aprio, was planning a deal to sell a majority stake to private equity firm Charlesbank Capital, according to people familiar with the situation.
Two others — PKF O’Connor Davies of New York and Carr, Riggs & Ingram of Alabama — hired bankers to manage the sales process, they said.
California-based Armanino, the nation’s 19th largest accounting firm, was in talks with a private equity provider to sell a minority stake, according to Accounting Today, the people said. Armanino made headlines as the auditor of the US operations of the FTX crypto exchange, which collapsed in 2022.
The wave of deals sweeping the profession means one in three of the top 30 firms has taken or is close to taking private equity investment.
“Partners are waking up to the fact that there is leverage to be gained by tapping into the capital markets,” said Alan Whitman, former CEO of Baker Tilly. “Companies’ capital needs have grown exponentially in recent years in terms of human costs and investments in offshoring and technology.”
Deals can also mean windfalls for partners and the prospect of capital appreciation through their continued holdings.
But regulators have expressed concern that private equity ownership could change the “tone at the top” of accounting firms and affect the quality of their audit work. Paul Munter, chief accounting officer of the U.S. Securities and Exchange Commission, said last month that “business leaders must be sensitive to the message such measures could send and be prepared to correct any such misperceptions.”
Private equity groups jumped into the accounting sector with gusto. The acquisition of a 60 percent stake in Grant Thornton for $1.4 billion with two co-investors New Mountain Capital was its second deal in the sector. Grant Thornton bosses settled a dispute with former partners over pension benefits and the acquisition closed last month.
There was also strong interest in the loan market for the $1.9 billion debt sale to refinance Grant Thornton’s obligations, which carried an interest rate of 325 basis points above benchmark Sofr, according to one person familiar with the sale.
“Private equity is penetrating the accounting profession in ways we never thought possible,” said Allan Koltin, a consultant to accounting firms. “It gets into the bloodline of companies of all sizes.”
Carr, Riggs & Ingram, which had revenue of $455 million last fiscal year, narrowed the field of potential investors to three after an initial bid deadline last month, according to people familiar with the situation. The transaction process is managed by investment bank William Blair.
PKF O’Connor Davies, which Accounting Today estimates at $380 million in annual revenue, has appointed Capstone Partners to handle the sale process, the people said. Aprio, with annual revenues of $420 million, tapped Falcon Consulting Group.
Charlesbank, Aprio and Armanino declined to comment. Carr, Riggs & Ingram and PKF O’Connor Davies did not return messages seeking comment.