Grant Thornton positions itself for private equity backing

11 July 2024 Consultancy.uk 3 min. read

As it seeks new ways to grow its market share in the British market, audit and advisory firm Grant Thornton UK is reported to be exploring a sale of a stake to private equity backers. The news follows a similar move by the professional services network’s US member in the spring of 2024.

Grant Thornton’s UK member firm is going through a number of transitions, as it looks to find new ways to expand within a market dominated by the Big Four of KPMG, Deloitte, EY and PwC. In less than a decade, Grant Thornton has removed more than 70% of public interest entity (PIE) clients from its books, including prominent listed companies and insurers – largely withdrawing from a segment of the auditing market where it struggled to win work from the Big Four, and saving on those tenders.

Amid this, Grant Thornton had to appoint a new CEO, after Dave Dunckley stood down in a surprise early departure. The firm’s partners elected Malcolm Gomersall as the new CEO, shortly before the firm announced its annual results in March – revealing that the firm’s growth had fallen from 12% the previous year, to 7% over 2023 – hitting £654 million.

Grant Thornton positions itself for private equity backing

Now, it seems that Grant Thornton UK has identified a potential opportunity to turn the situation around, and accelerate the firm’s growth once more. According to a report from The Times, Grant Thornton is weighing up a radical plan to sell a stake in its 100-year-old business to private equity. It is understood that the firm has already begun “sounding out private equity firms” over possibly buying into the business.

Grant Thornton UK is currently jointly owned by more than 200 partners – and a key part of any deal would be that the firm’s audit practice would still be majority-owned by them. To help find suitable partners to this end, the firm is understood to be working with advisers from Rothschild.

However, at this early stage this is all relative, as Grant Thornton UK also told the UK paper it was not “actively engaged” in a transaction, and that it “continually evaluates” the business landscape. Similarly, a spokesperson for Grant Thornton Ireland – run separately to the UK business – confirmed the firm was looking at “strategic options”, but added no sales process had been initiated at the time of writing.

US deal

The deal follows a recent precedent set by another wing of the Grant Thornton network. In March 2024, Grant Thornton US became the largest professional services firm to sell a piece of itself to private-equity investors. The firm’s Chicago-based US unit closed the sale of a stake to a group led by New Mountain Capital, which allowed the audit business to remain a partnership, while US advisory, tax and other non-audit services became part of Grant Thornton Advisors; a newly created limited liability company.

The investment will allow the firm to grow through acquisitions and investments in tech and personnel. And while the New Mountain-led group’s investment constitutes a 60% stake centers on the non-audit business, it also opens up new contractual opportunities for the audit wing, sources told the Wall Street Journal.

Grant Thornton was reported to also be in preliminary discussions at the time of the deal, which would see its audit wing gain New Mountain as a new client for certain tax services. According to its national managing partner for tax services, Renato Zanichelli, while New Mountain had previously been served by the Big Four, Grant Thornton was “making strides” when it came to how “we might be able to serve them in their capacity”.

If the UK wing were to find a similar deal in terms of the size of stake, and the ring-fencing of its audit practice, it might also be able to find similar opportunities. In that case, it might finally find a way to challenge the Big Four for leading contracts again.