The Future of Grant Thornton: A Buyout in the Works?

In recent developments within the UK accountancy landscape, a Swedish buyout firm, EQT, has emerged as a key player in the potential acquisition of a significant stake in Grant Thornton’s UK operations. This move is part of a broader trend where several private equity firms are vying for a piece of one of Britain’s largest accountancy firms, which has faced its share of challenges in recent years.

EQT Joins the Bidding War

EQT, known for its strategic investments across various sectors, including technology and healthcare, has made headlines by submitting an offer to Grant Thornton’s advisers. This bid comes ahead of a deadline that passed earlier this week, indicating EQT’s serious interest in expanding its portfolio. The firm is currently in the process of acquiring Keywords Studios, a computer games producer, showcasing its aggressive growth strategy.

EQT is not alone in this pursuit. Other notable bidders include prominent private equity firms such as Carlyle, Cinven, CVC Capital Partners, and Permira. Nordic Capital has also been reported to have considered an offer, highlighting the competitive nature of this auction. Industry sources suggest that a successful deal could value Grant Thornton’s UK arm between £1 billion and £2 billion, a significant figure that underscores the firm’s market position.

CVC Capital Partners: A Unique Interest

Among the bidders, CVC Capital Partners stands out due to its ownership of Teneo, a professional services firm that offers a range of services including public relations, political advice, and financial restructuring. CVC’s involvement is particularly intriguing given the backdrop of recent audit scandals that have rocked the accountancy sector, leading to increased scrutiny and calls for the separation of audit and consulting services.

CVC has owned Teneo since 2019 and acquired its restructuring arm from Deloitte in 2021. This acquisition was partly a response to the growing conflicts of interest within large accounting firms, where audit and consulting practices often overlap. As CVC looks to potentially exit Teneo in the coming years, its interest in Grant Thornton could align with its broader strategy to reshape its investment portfolio.

The Impact of Audit Scandals

The backdrop of this bidding war is marked by significant audit scandals involving major companies like BHS and Carillion. These incidents have intensified public and political pressure on accounting firms to separate their audit and consulting operations to mitigate conflicts of interest. Grant Thornton has not been immune to scrutiny; the firm has faced fines from the Financial Reporting Council (FRC) for serious failings in its audits.

In 2022, Grant Thornton was fined £1.3 million for deficiencies in its audit of Sports Direct, now known as Frasers Group, and the previous year, it received a £2.3 million penalty for its handling of Patisserie Holdings, the parent company of the collapsed Patisserie Valerie chain. These incidents have prompted Grant Thornton to reduce its number of public interest entity (PIE) audit clients, which include banks and insurers, in an effort to regain credibility and focus on its core competencies.

Grant Thornton’s Strategic Response

In light of these challenges, Grant Thornton has been proactive in evaluating its business strategy. A spokesperson for Grant Thornton UK LLP stated, "As all businesses do, we continually evaluate the external business and economic landscape and explore various avenues that will drive growth for our firm." This approach reflects a commitment to making informed decisions that benefit their partners, clients, and overall business health.

With approximately 200 partners at Grant Thornton, any potential transaction would require a decisive vote from these stakeholders. The firm’s US counterpart has already taken steps in this direction, having concluded a deal with New Mountain Capital to sell a majority stake, indicating a trend towards private equity involvement in the accountancy sector.

Conclusion: A Pivotal Moment for Grant Thornton

As the bidding process unfolds, the future of Grant Thornton hangs in the balance. The involvement of multiple private equity firms, each with its own strategic interests, suggests that a significant transformation may be on the horizon for this storied accountancy firm. Whether EQT or another bidder ultimately secures a stake, the implications for Grant Thornton and the broader accountancy industry will be profound, potentially reshaping how audit and consulting services are delivered in the UK.

In a landscape increasingly defined by scrutiny and the need for transparency, the outcome of this bidding war will not only affect Grant Thornton’s operations but could also set a precedent for how accounting firms navigate the complexities of modern business ethics and governance. As stakeholders await further developments, one thing is clear: the future of Grant Thornton is poised for change.