Citrin Cooperman deal is reportedly private equity’s “first flip” of an accounting firm

Citrin Cooperman, the 19th largest CPA firm in the US by revenue, is being passed to a new private equity owner in another deal highlighting accounting’s “wave of consolidation” fueled by PE funding.

Investors led by Blackstone will acquire a majority stake in the middle-market and high-net-worth specialist from New Mountain Capital, making it “the first flip of an audit firm by a private-equity investor,” according to the Wall Street Journal.

New Mountain’s October 2021 purchase of Citrin Cooperman was one of the first private equity investments in major accounting firms. By November, PE firms had acquired a stake in 10 of the 30 largest firms by revenue.

PE-backed firms are using the new investment to scoop up smaller funds. When New Mountain bought its stake in Citrin Cooperman, the firm was valued at about $500 million, the Financial Times reported. By last September—less than three years later—Citrin Cooperman had acquired at least 11 CPA firms and two consulting firms, and its website shows four more deals in October, November, and December. The Blackstone-led deal, “expected to close in the second quarter,” values Citrin Cooperman today at $2 billion, according to the Wall Street Journal.

Under the deal, the investment group will acquire a more-than-two-thirds stake in Citrin Cooperman, with Blackstone getting 40%–45% for itself, according to the WSJ.

Unnamed sources told the FT that the deal is structured “to keep Blackstone’s stake below 50% and assuage regulatory concerns about the independence of Citrin Cooperman’s audit business.” SEC Chief Accountant Paul Munter told the Journal in December that private equity investments in accounting firms risk “a significant culture shift away from a public interest mindset and focus on audit quality.” He warned that “the entire firm” is responsible for upholding audit independence—not just auditors.