Actually I’m not 100% on that. I’ll be having a few pints with the nearly partner Sunday so will find out. You’d imagine that New Mountain Capital investment is being used to sweeten them in giving up their current partnership share.
I’d say the Scot has made out like a bandit here. I would have known him well once upon a time a decent enough fella…wouldn’t have had him down for the absolute genius that he clearly is all the same
The 45 equity partners are getting 6.5m each. The 25 salary partners are getting SFA.
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The equity partners might treat them to a celebratory pint in the Ferryman.
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Ouch. Plus I assume there’s a serious dent in future earnings potential of the salaried partners? Will there still be equity there for them to get in the future?
No chance.
I’d imagine a chunk of that is earn-out otherwise you might see a rush for the exit door
60/40 cash to shares according to the Times. On a value of €480m I can see where that guess of €6.5m comes from.
They’ll have to be paying more than those 40 odd though or there would be loads walking out.
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Below partner level they got some equity not massive but enough to keep them there for now is what I was told
They’d have to do something like
What is the Ebidta for GT Ire?
Definitely an earn out.
Definitely equity for partners and down as far as directors I’d say.
Multiple of 12 according to the Times.
I suspect there’s a small number making out like bandits. A few in the middle where they are probably getting what is essentially an advance on the future profits of the advisory business to compensate for their loss of the share of those profits and then they salaried partners and pipeline who got stuffed.
@Appendage can you check the latest Transparency Report for GT? 45 equity partners seems way too low. I thought they had closer to 70.
Apparently it’s not an even split of that dough between equity partners, there is a few levels to it. Partners at top level will get in excess of 10m. They’ll get 60% upfront and roll 40% into the new entity which will prob be sold again in 5 years.
If the dynamic of a typical large accountancy like that is for the mid-level staff to break their hole chasing a partnership - is that disrupted now?
I suppose I’m asking if everyone is as delighted with the deal as the lads who are making out like bandits and how might that lay out from here?
I think the next step in the development of LinkedIn, to make it entertaining & usable, is for people to comment under announcements like this from GT & GT partners.
“Ooofffttt. Partnes making out like bandits & pulling up the ladder behind them. There must be absolute murder behind the scenes there.”
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You’d imagine there’ll be a whiff of cordite in the air at the forthcoming coming Christmas lunches - as partners in other firms seethe at their corporate buddies success
What’s the PE growth strategy with GT - do you not risk losing all your next generation talent to other firms who can offer seven figure partnership incomes.
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I suppose it’s no different to an Accenture or another consulting firm who are listed.
They are free from the regulatory burden of audit. Automate more work and consolidate vs. smaller competition. Then float the thing.
I suspect though that it won’t really be all that successful for everyone (it could work for one or two mid tier). The USP of these firms is local relationships and one stop shops. You can incentivise these for staff to a degree but I’m not sure how you could stop a tax partner leaving with their book of clients. Nobody gives a fuck if you are automating tax, it’s real money on the line that people don’t want to mess with.
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Anyone do the honours…archive md not working
In October, Grant Thornton Ireland and Grant Thornton US confirmed they were merging their advisory and tax businesses, in a deal backed by New Mountain Capital.
The New York private equity firm had previously taken a majority stake in the US affiliate. The tie-in with the Irish firm quickly followed, and the deal is expected to be rubberstamped in the first quarter of next year.
“This transformational partnership will enhance our appeal to a much broader international client base, as the first truly integrated US and Irish professional services firm, combining the expertise and reach of both firms,” Steve Tennant, chief executive of Grant Thornton Ireland, said at the time.
But just how is the deal being structured? And what sort of numbers are involved?
The ratings agency Moody’s has evaluated debt raised to help fund the acquisition. Obtained by The Currency, the research note reveals new financial and operational details of the deal.
Grant Thornton Advisors LLC (GTA), the US entity, will pay a maximum price of $504 million (€480 million) to acquire the Irish operation, according to the ratings agency.
The note details how a proposed loan would be used to fund the “up-front cash portion of the acquisition, pay transaction-related fees and expenses and add cash to the balance sheet”.
According to the note, the partners of “the Ireland business will contribute an initial $125 million of rollover equity”.
It says the “remaining sale proceeds are subject to performance, including a maximum $90 million of cash, which we expect will be funded with drawings under the proposed delay draw term loan, balance sheet cash and the revolver”.
Moody’s also stated that 56 per cent of the company will be owned by the investor group led by New Mountain with 38 per cent owned by the former partners of Grant Thornton US. A further 6 per cent will be owned by Grant Thornton Ireland partners “if all contingent consideration is paid”.
Moody’s granted a B2 corporate family rating to GTA. It said the rating reflected “high debt leverage, uncertainty regarding the impact of the change in organization structure and partner compensation on the business, and our anticipation for aggressive financial strategies”.
Moody’s also said that it anticipated a debt-to-earnings before interest tax depreciation and amortisation (Ebitda) ratio of around 5.7 times in the 12 months to the end of September 2024. It expected this to drop to around 5 times over the next 12 to 18 months “if there are no additional debt-funded transactions”.
“Leverage reduction will be achieved through low-to-mid single-digit organic revenue growth and over 100 basis points of profit margin expansion, driven by cost reduction initiatives, including through the adoption of Grant Thornton’s India business operations centre by the acquired Ireland business,” Moody’s said.
The ratings agency also added that it expected “aggressive financial strategies, notably through the use of debt proceeds to complete acquisitions over the next several years”.
Grant Thorton’s Irish operation, which employs around 2,800 people, recorded annual revenues of around €300 million last year, which compared to the $2.4 billion brought in by GTA. The deal was the first announced since New Mountain’s investment into the American business.
The company said at the time that the new entity would be led by Seth Siegel, the CEO of GTA, with Tennant set to take on the role of president of Grant Thorton Ireland. He will also be a member of GTA’s executive committee.
Grant Thorton’s UK business had also been the subject of intense speculation around outside investment coming into the firm. The process to back the British business came to an end in November when private equity business Cinven agreed to acquire a majority stake.
The note also provided commentary on the wider Grant Thornton operation in the US, stating: “Although Grant Thornton has a broad industry focus and scale, it is smaller and offers fewer services and more limited areas of expertise than the Big Four accounting firms against which it competes. Revenue and profitability are dependent on attracting and retaining key revenue-producing employees and efficient utilization of professionals. Larger advisory firms can make investments in technology and off-shore service centers, among other things, which drives our anticipation for Grant Thornton to grow both organically and through acquisitions.”
In further commentary on the Irish deal, it stated: “In connection with the acquisition, GT Ireland will enter into an agreement with an Ireland consolidated variable interest entity that will remain a partnership, which will perform traditional public accounting services consisting of performing attest services in Ireland. GT Ireland and the attest entity will operate in an alternative practice structure, just as Grant Thornton and Grant Thornton LLP do in the US.”
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