Grant Thornton Attracts Interest from Leading Private Equity Firms

Prominent private equity players are eyeing Grant Thornton, possibly initiating a bidding process for the UK’s sixth-largest accounting firm as early as next month.

CVC, the European owner of La Liga, is scrutinizing Grant Thornton’s UK operations, which employ around 5,500 people, with the intention of placing a bid.

KKR has also been evaluating a potential bid in recent weeks, although insiders say KKR’s current level of interest remains uncertain.

According to sources in private equity, Grant Thornton, with advisory support from Rothschild bank, has been actively engaging with firms regarding the possibility of acquiring a stake. A formal bidding process is anticipated to commence within the next month.

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In the previous year, the mid-tier accounting firm reported a revenue of approximately £654 million, marking a 7% increase over the prior year. Historical profit multiples and private equity estimates suggest that a deal would value Grant Thornton at around £1.5 billion.

Regulations mandate that audit firms must be majority-owned by certified accountants, implying that any acquisition would need to isolate Grant Thornton’s auditing division. Despite this, audit partners are expected to retain financial interests in the non-audit business.

As with many professional services firms, Grant Thornton is contemplating selling a stake to private equity firms. Last month, The Sunday Times disclosed that Grant Thornton’s UK division was exploring this option. The company is also considering a merger with its American counterpart, which sold a majority stake to PE firm New Mountain Capital in March.

Grant Thornton, KKR, and CVC have all declined to comment.

CVC and KKR have a history of acquiring service-oriented businesses. In 2019, CVC became the majority shareholder of Teneo, a public relations firm, and merged it with Deloitte’s former restructuring team in 2021.

The restructuring team, led by Dan Butters, separated from the Big Four accounting firm partly due to conflict of interest regulations, which restricted them from serving audit clients. However, if CVC were to acquire Grant Thornton, similar concerns might arise, potentially limiting Teneo’s client base.

KKR increased its stake in another PR firm, FGS Global, from 30% to 80% in 2023, valuing the company at $1.6 billion (£1.2 billion).

Traditionally, private equity firms have been cautious about entering the professional services sector due to a lack of physical assets to leverage. However, the past decade has seen a shift, with private equity identifying opportunities by consolidating smaller professional services firms.

Additionally, professional services partnerships have shown a growing interest in attracting external capital, as any investments into their firms usually come from their year-end distributions.