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Bahrain-based private equity group Investcorp is buying one of the largest privately owned tax and accounting partnerships in the US, part of a wave of dealmaking for accounting groups, talent agencies and professional services firms.
Investcorp and Canadian pension fund PSP Investments are buying PKF O’Connor Davies, the 25th largest accountancy firm in the US by revenue, as it increases its investments in professional services groups, according to people familiar with the matter.
The capital infusion, which will be announced later on Monday, is expected to help the New York-based accountancy firm acquire smaller rivals and invest heavily in its technology.
Financial terms of the investment could not be learned. Previously, the FT reported that PKF O’Connor Davies had hired Capstone Partners to run a sale process.
The deal comes amid a flurry of takeover activity which has put a third of the largest 30 accounting groups in the US inside the portfolios of private equity investors, according to the FT’s reporting.
Earlier this year Baker Tilly agreed to sell a controlling stake to Hellman & Friedman and Grant Thornton’s US operations were sold to New Mountain Capital, bringing two of the largest independent accountancy groups under private equity ownership.
The injection of cash from the private equity industry has caused accounting groups to go on the offensive, using the funds to build new services by making acquisitions or to invest in their internal technologies, ranging from digital software services to artificial intelligence tools.
PE investors have also found a large opportunity to invest into these partnerships because a competitive job market and the ageing of many founders has caused firms to try to create an equity value in order to grant stock to employees.
Most partnerships typically offer large payouts through the addition and subtraction of members of the partnership, but that can mean top staff have to work for decades before receiving large bonuses. Once a company creates an equity value it can grant stock awards that can be a valuable recruitment tool for new hires and pay for top performers.
Investcorp, which manages $53bn in assets, has invested heavily in other white collar partnerships. It also owns financial advisory group AlixPartners, strategic communications specialist ICR and United Talent Agency, one of the largest talent agencies in the world.
PKF O’Connor Davies has about 200 partners and annual revenues of $380mn, according to trade publication Accounting Today.
Other accountancy firms considering selling to private equity include Carr, Riggs & Ingram of Alabama, the FT previously reported. Accounting groups Aprio and Armanino have also recently announced private equity investments.
https://www.ft.com/content/c30585d8-40d1-4b1a-b62b-32511214fa30
