The private equity backer of Six Nations Rugby is plotting to buy a stake in one of Britain’s biggest audit firms – a deal which could have ramifications across the professional services sector.
Sky News has learnt that CVC Capital Partners is among the buyout firms preparing to table bids for a controlling stake in Grant Thornton UK.
The process, which is at an early stage, is expected to value the accountancy group at between £1bn and £2bn, and could result in the most significant transaction to date in the UK’s audit industry.
CVC’s interest is particularly significant, however, because it already owns Teneo, a professional services firm spanning public relations, political advice and financial restructuring, including company administrations and liquidations.
The latter part of the business was acquired from Deloitte, the professional services giant, in 2021 and was partly borne out by the growing issue of conflicts within large accountants between their audit and consulting arms.
One City analyst said this weekend that the common ownership of an interest in Grant Thornton UK and Teneo’s financial restructuring business could recreate those potential conflicts.
CVC has owned Teneo since 2019 and would be expected to pursue an exit from the business in the next couple of years.
Audit scandals at companies such as Bhs and Carillion fuelled public and political pressure for the separation of accountants’ audit and consulting operations.
Although audit reform failed to make it onto the statute book under a succession of Conservative prime ministers, it was included in the recent King’s Speech, paving the way for tougher audit regulation.
Grant Thornton has itself been no stranger to run-ins with the existing watchdog, the Financial Reporting Council (FRC).
In 2022, it was fined £1.3m for “serious failings” in its audit of Sports Direct, the sportswear empire founded by Mike Ashley and now known as Frasers Group.
It was also handed a £2.3m penalty the year before for demonstrating a “serious lack of competence” in relation to its work on Patisserie Holdings, the owner of the collapsed cafe chain Patisserie Valerie.
Since then, Grant Thornton has slashed the number of so-called public interest entity (PIEs) audit clients, a category which includes banks, insurers and other companies deemed to be of particular importance.
This has resulted in an improvement in audit quality, according to one Grant Thornton partner, as well as a lessening of the scrutiny applied by the FRC.
People close to the sale process for the UK arm of Grant Thornton say it is seeking expressions of interest next month, and is prepared to consider a deal both involving or excluding its audit business.
CVC is expected to face stiff competition from a multitude of other private equity firms.
A spokesperson for Grant Thornton UK LLP said: “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 enables us to make informed decisions about what’s best for our people, our clients and our firm.
“We are not actively engaged in any such transaction.
“We are committed to remaining as a multi-disciplinary firm.
“We will not be commenting further on this matter.”
Grant Thornton UK has about 200 partners, who would have a decisive vote on any transaction.
The firm’s US entity has already concluded a deal with New Mountain Capital, another private equity group, to sell a majority stake.
Last month, the Financial Times reported that Grant Thornton US had held discussions about acquiring both its UK and Irish affiliates, although the chances of such a deal happening were described this weekend as “slim”.
CVC declined to comment.
(c) Sky News 2024: Six Nations backer CVC eyes stake in Grant Thornton UK arm