Private equity firms Hellman & Friedman (H&F) and Valeas Capital Partners have made a strategic investment in Baker Tilly US, a top-10 accounting and consulting firm.
The two private equity firms will take an equity stake of approximately $1 billion for just over half of the firm, a person familiar with the deal told the Financial Times, with over $900 million coming from H&F. There is also an undisclosed amount of debt financing being provided by a group of private lenders.
The money will be used to buy out retirement obligations and return capital to Baker Tilly’s 600 current partners. It will also create a war chest for acquisitions as the firm aims to challenge mid-market rivals RSM, Grant Thornton, and BDO.
As part of the transaction, which is expected to close in early June, Baker Tilly will split into an alternative practice structure. Jeff Ferro, current Baker Tilly CEO, will serve as CEO of Baker Tilly Advisory Group LP, which will house the firm’s advisory, tax, and other services. Jere Shawver, managing partner for risk and assurance, will serve as CEO of Baker Tilly US LLP, a licensed CPA firm.
Both firms will remain partnerships, with partners holding equity alongside H&F and Valeas in Baker Tilly Advisory Group LP.
“Our investment in Baker Tilly builds on H&F’s long history of successful partnerships in the professional services sector,” said Blake Kleinman, partner at H&F. “We are excited to invest alongside Baker Tilly’s partners and senior leadership to bolster its capabilities, expand its footprint, and, together, help build the country’s preeminent mid-market advisory CPA firm.”
H&F focuses on the business services industry, with over $92 billion in assets under management as of September 30, 2023. The PE firm’s notable deals include ad agency Young and Rubicam in 1996 and consulting firm AlixPartners in 2006 (subsequently sold to CVC in 2012).
“We are extremely proud to join forces with H&F and Valeas, blue-chip and growth-oriented private equity investors, who support our vision, recognize the value we’ve already created and see our vast future potential,” said Ferro. “With this transaction, the firm will be in an even stronger position to grow and invest in our business to create new opportunities for our talented team members and valued clients.”
Based in Chicago, Baker Tilly has over 6,400 employees across 50+ offices nationwide. The firm is on track to register $1.8 billion in revenue for the fiscal year ending in May 2024.
BDO in August announced a $1.3 billion debt deal with Apollo Global Management to create an employee stock ownership plan.
Mid-market CPA firms Forvis and Mazars USA announced their merger in November, while PE firm TPG in August agreed to acquire Crowe’s healthcare consulting unit.