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Firm Management

Baker Tilly Gets Big Private Equity Boost From H&F and Valeas

The transaction, which is expected to close in June, is said to be the largest private equity investment in the CPA sector thus far.

Baker Tilly said on Monday it has received a “significant investment” from private equity firms Hellman & Friedman and Valeas Capital Partners in what the top 10 accounting firm says is the largest private equity investment in the CPA sector thus far.

Financial terms of the deal, which is expected to close in early June, weren’t disclosed. The Financial Times reported that H&F and Valeas would take an equity stake of about $1 billion for just over 50% of the Chicago-based accounting and advisory firm, with more than $900 million coming from H&F, according to a person familiar with the deal. There will also be an undisclosed amount of debt financing provided by a group of private lenders, including Blackstone Credit, HPS Investment Partners, and Blue Owl Capital, FT reported.

Baker Tilly’s firms in the U.S. had revenue of $1.58 billion during its most recent fiscal year, according to INSIDE Public Accounting.

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The significant investment from H&F and Valeas provides the firm with access to additional capital and capabilities to “accelerate growth through investments in talent, technology and further strategic acquisitions directed at providing best-in-class client services,” Baker Tilly said in a news release.

FT reported that the money will predominantly be used to buy out retirement obligations to former partners and return capital to its 600 current partners, as well as to recapitalize the balance sheet and build a war chest for mergers and acquisitions.

“This investment is a huge step for Baker Tilly, and it will certainly put the firm in a strong position to lead the consolidation of the public accounting industry,” Allan Koltin, CEO of Koltin Consulting Group, who provided counsel to Baker Tilly and H&F throughout the process, said in a statement to CPA Practice Advisor.

As part of this transaction, the firm said it will be restructured as two entities: Baker Tilly Advisory Group will provide the firm’s business advisory, tax, and other services with Jeff Ferro (pictured, left) continuing in his role as CEO. Baker Tilly US will provide the firm’s attest services, with Jere Shawver, managing partner of risk and assurance, stepping into the new role of CEO. Baker Tilly US will operate as a separate legal entity pursuant to regulatory and independence requirements. Following the restructuring, both firms will remain partnerships, with all partners holding equity alongside H&F and Valeas in Baker Tilly Advisory Group.

“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,” Ferro said in a statement. “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.”

Blake Kleinman, partner at H&F, said the investment in Baker Tilly builds on H&F’s long history of successful partnerships in the professional services sector.

“Baker Tilly has built a remarkable firm with an empowering culture, tremendously talented workforce, and impressive track record of growth through outstanding client service and smart acquisitions,” he said. “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.”

Ed Woiteshek, co-founder and managing partner at Valeas, added, “As a top global brand in accounting, tax and advisory with a strong track record of value creation and growth, Baker Tilly is uniquely positioned to lead the transformation of the industry. We look forward to working with Baker Tilly’s leaders to further the firm’s impressive growth trajectory in the years ahead.”

Baker Tilly engaged William Blair & Company as its financial advisor and Foley & Lardner as its legal counsel on this transaction. Simpson Thacher & Bartlett and Vedder Price served as legal advisors to H&F and Ropes & Gray advised Valeas, according to the news release.