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A Blackstone-led investor group is about to secure a major acquisition: a controlling stake in the US accounting firm Citrin Cooperman. This deal, valuing the company at over $2 billion, represents a leap in sector valuations.
Sources indicate that Blackstone has purchased the stake from New Mountain Capital, a smaller competitor. This marks Blackstone’s first major foray into an industry that’s experiencing a surge in takeovers. Over the past few years, a third of the largest US accounting firms have been snapped up by private equity funds, with Citrin Cooperman standing out as the first to change hands twice.
Details of the transaction will be released later today, according to insiders. The Blackstone-led group is expected to own more than two-thirds of the company but will include smaller investors to ensure Blackstone maintains a stake below 50%. This strategic move aims to address any regulatory concerns regarding the independence of Citrin Cooperman’s audit operations.
In terms of revenue, audits make up about 20% of the firm’s earnings, while more than half comes from tax services and the rest from advisory work.
New Mountain was among the pioneers in private equity investments in the accounting sector when it acquired a controlling interest in Citrin Cooperman back in late 2021, giving the firm an enterprise value of roughly $500 million. The sector has been anxiously waiting for this sale as it could provide valuable insights into current valuations.
Two sources familiar with the transaction reported that Blackstone is acquiring Citrin Cooperman at approximately 15 times its earnings before interest, taxes, depreciation, and amortization (EBITDA), compared to New Mountain’s original purchase price of 11 times EBITDA.
A source close to Blackstone mentioned that the business is perceived as a lower-risk venture now compared to when New Mountain made its acquisition.
The involvement of private equity has significantly ramped up merger and acquisition activity within the accounting sector. When New Mountain acquired Citrin Cooperman three years ago, the firm reported $350 million in revenue. Following a series of smaller acquisitions, this figure has grown to approximately $850 million by 2024, placing the firm among the top 20 in the United States.
Citrin Cooperman’s partners are set to retain the majority of their stake in the firm but will profit from selling some of their shares, according to those close to the Blackstone deal. Partners were informed about the agreement details on Monday.
It’s expected that the management’s share will increase over time through the allocation of performance bonuses.
After the Citrin Cooperman deal, New Mountain expanded its reach last year by acquiring a significant stake in Grant Thornton, a much larger US accounting firm whose clientele generally consists of larger corporations compared to Citrin Cooperman’s focus on smaller and mid-sized businesses. Just last week, Grant Thornton US also acquired its Irish counterpart, with New Mountain providing the financial backing for the deal.
Both Blackstone and New Mountain have opted not to comment on the transaction.
