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The pace of private equity dealmaking in US professional services picked up on Monday, with separate takeovers of two of the largest tax and accounting firms in the country.
Bahrain-based private equity group 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.
Alabama-based Carr, Riggs & Ingram, the 23rd largest firm, meanwhile said it would sell a majority stake to a group led by Centerbridge Partners, an investment manager with $40bn in assets in private equity, private credit and real estate.
The deals come 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.
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.
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.
PKF O’Connor Davies said on Monday that the capital infusion from Investcorp would help the New York-based accountancy firm acquire smaller rivals and invest heavily in its technology.
Carr Riggs chair Bill Carr said the investment from Centerbridge and Bessemer Venture Partners would help accelerate a mergers and acquisition strategy of expanding geographically and adding new services.
Financial terms of the investments could not be learned.
PE investors have found a large opportunity to invest in accounting 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 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. Carr Riggs had revenues of about $455mn last year.