Grant Thornton Closes Deal With Private Equity Firm New Mountain Capital

Grant Thornton completed the sale of a stake in the firm to New Mountain Capital on May 31, officially making it the largest accounting firm in the U.S. to receive a private equity infusion thus far.

The deal was announced last March and was awaiting regulatory approval and other standard closing conditions. It followed on the heels of private equity firms Hellman & Friedman and Valeas Capital Partners taking an equity stake of about $1 billion for just over 50% of Chicago-based Baker Tilly, the 10th-largest U.S. accounting firm by revenue, with more than $900 million coming from H&F, according to published reports. That had been the largest private equity deal involving a public accounting firm until Grant Thornton’s.

Now that the deal has closed, Chicago-based Grant Thornton will operate in an alternative practice structure: Grant Thornton LLP, a licensed CPA firm, will provide attest services, and Grant Thornton Advisors LLC will provide business advisory and non-attest services.

Seth Siegel, who has been CEO of Grant Thornton US since August 2022, will lead Grant Thornton Advisors. Janet Malzone was named interim CEO of Grant Thornton LLP and a principal at Grant Thornton Advisors, according to her bio on the firm’s website.

Financial terms of the deal weren’t disclosed; however, Grant Thornton called the investment “significant.” The Wall Street Journal reported last Friday that the New Mountain-led group’s investment constitutes a 60% stake in Grant Thornton’s U.S. unit and centers on the non-audit business.

The new majority owners will also have a contractual relationship with the audit business through a management services agreement between the two entities, according to the WSJ.

CDPQ, a global investment group headquartered in Canada, and OA Private Capital, a family office investment advisory firm located in Michigan, made minority equity investments in Grant Thornton alongside New Mountain Capital, according to a media release.

Grant Thornton recorded a record $2.4 billion in revenue during its 2023 fiscal year, which ended July 31, making it the seventh-largest accounting firm in the U.S. by revenue. Grant Thornton has now changed its fiscal year end to Dec. 31. New Mountain Capital has approximately $50 billion in assets under management.

Seth Siegel

“Grant Thornton will soon celebrate our 100th year in business—an anniversary distinguished by our firm’s strong momentum, unparalleled team, and recent record-setting revenues,” Siegel said in a statement. “Partnering with New Mountain Capital, CDPQ, and OA Private Capital will empower us to accelerate our winning strategy, benefit our clients and team members, and solidify our position as the industry’s platform of choice for the next 100 years.”

The sale will allow the firm to grow through acquisitions and investments in technology and personnel, likely at a faster pace and with less risk than it otherwise would have, Siegel told the WSJ.

“With additional support behind us, including access to enhanced technology and other resources, we see great potential to quickly expand upon our current capabilities and drive even better holistic support and execution for our clients,” added Jim Peko, chief operating officer of Grant Thornton Advisors.

Nikhil Devulapalli, managing director at New York-based New Mountain Capital, said, “We see numerous opportunities to further enable Grant Thornton’s top-tier talent with targeted technology investments and are excited to support the company in bringing its services to even more clients across key markets.”

The separation of audit and non-audit services through the deal allows the firm to comply with securities laws prohibiting conflicts of interest that could impair the objectivity of the firms’ auditors, Siegel told the WSJ. The partners in the new non-audit entity will have equity stakes and voting power.

A group of retired Grant Thornton partners seeking a bigger payout than the firm laid out had hired lawyers to try to put a stop to the deal. However, the firm has since reached agreeable terms with the retirees, Siegel told the WSJ, declining to disclose the terms.

The completion of the deal with the New Mountain Capital-led group comes more than a week after Grant Thornton began the process of laying off 350 employees, equating to roughly 3.5% of its U.S. workforce. In addition, incoming associates have had their October start dates delayed until January 2025.

Siegel told the WSJ that he isn’t anticipating any layoffs directly related to the New Mountain transaction.