Grant Thornton UK picks personal fairness over US merger | USAEMALL.com

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Grant Thornton UK, the country’s sixth largest accounting firm by revenue, has agreed to sell a stake to the buyout group Cinven, marking the most significant private equity investment to date in the UK accounting sector.

Cinven beat rival offers from other private equity groups including Sweden’s EQT, and from Grant Thornton’s sister firm in the US, which had proposed a transatlantic merger.

The size of the stake and the price that Cinven has agreed to pay could not immediately be learned. Grant Thornton UK had engaged bankers at Rothschild to run an auction that partners hoped would value the firm at about £1.5bn and one person familiar with the bidding said that it had earlier reached about £1.3bn.

Financial buyers have been extending their influence in a profession that has historically preferred to operate as private partnerships. Earlier this week, two top 30 US accountancy firms announced the sale of majority stakes to private equity.

Accounting firms have been expanding bolt-on services such as financial and technology consulting in recent years, and private equity has provided capital to accelerate investments in IT and merger and acquisitions activity, as well as providing a windfall for existing partners.

Grant Thornton US is the largest American accountancy firm to have sold a majority stake to private equity, and its owner New Mountain Capital has set its sights on international expansion. Last month, it inked a deal to acquire Grant Thornton Ireland and had hoped to complete a three-way merger.

However, the leaders of the UK sister firm decided they preferred to remain independent rather than fold the business into the US operation, according to people familiar with their thinking.

Grant Thornton UK said: “Having evaluated the external landscape, we have agreed initial terms with an investor, who we feel is best placed to support our accelerated growth in the medium term.

“The terms of any transaction remain confidential and are subject to ratification by the partnership and regulatory approval.”

Grant Thornton UK reported revenues of £654mn last year, a 7 per cent increase on the previous year, and an 18 per cent increase in operating profit to £146mn.

The improved financial results came despite moving away from auditing so-called “public interest entities” such as listed companies, banks and insurers, which can be lucrative but attract the highest level of regulatory scrutiny.

Grant Thornton was demoted last year from the UK accounting watchdog’s top tier of audit supervision.

Cinven owns other financial services groups including Alter Domus, a fund administration group it acquired this year, and German life insurance consolidator Viridium.

Cinven declined to comment.