Top 25 firm Armanino LLP has taken on a strategic minority investment from private equity firm Further Global Capital Management.
The deal, which closed today, is the latest in a series of private equity investments in major accounting firms that began in 2021, but with a big difference, Armanino CEO Matt Armanino told Accounting Today. spoke.
“Perhaps the punchline here, which I think is really unique, is that we wanted to focus on minority investments where we could retain not only operational control of the business but also ownership control of the business,” he said. Ta. “These are some of the guiding principles that we have been thinking about over the last few years, and we felt that if we could achieve these things strategically with the right partners, it would be just a home run. I think I did.”
As is common among CPA firms that undertake private equity investments, Armanino LLP will restructure its practice into a separate practice structure and separate into two independently owned and managed professional services entities. Armanino LLP is a CPA firm wholly owned by individual CPAs and provides certification. Armanino Advisory LLC, a consulting and advisory firm, provides services to customers and performs non-certification services.
Transaction details
Like many large companies, Armanino LLP has been focused on private equity for some time.
“We have been analyzing trends in PE for the past few years, and our discussions with Further Global actually began several years ago. Along the way, our initial inclination was that Further Global would be a great partner for us. ,” CEO Armanino said. .
“We had the opportunity to meet with dozens of large private equity firms,” he explained. “Ultimately, we concluded that Further Global was the best partner for our company, particularly based on their expertise in partnering with professional services businesses and our desire for a minority deal structure. did.”
matt armanino
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Citing Further Global’s “deep expertise” in financial and business services companies, Armanino noted that this is the company’s first foray into accounting expertise. That’s about it for now. ”
Further Global, an employee-owned PE firm, invests in companies in the business and financial services industries and has raised over $2.2 billion in capital.
Guggenheim Securities LLC served as financial advisor and sole private placement agent to Armanino LLP, and Hunton Andrews Kurth LLP served as legal advisor. Future Global was advised by Pointe Advisory with Kirkland & Ellis as legal advisor.
“Armanino is ranked as high as any CPA firm in the country in the private equity community,” said Alan, CEO of Coltin Consulting Group, who has advised Armanino for more than 20 years. Coltin commented. “Their deal with Further Global fits like a glove. They maintain control and now have the capital structure to compete on the biggest stage.”
Internally, Armanino’s partner group supported the deal and agreed to sell only a minority stake.
“We have had transparent discussions at management level as well as adding external investors, and we knew early on that minority investment was the best path forward for us. “We are very excited that we received unanimous support from the Partnership Group for that decision,” Armanino said. “This structure will give Armanino’s long-term owners and partners full control over the day-to-day operations of our company and the proud culture we have built.”
“No other company in the top 25 has a structure like this, and I think that’s very important,” he added.
capital planning
The transaction’s goals are to provide Armanino with the capital it needs to reach new levels of growth, while also investing in its most pressing financial needs, such as investing in technology, pursuing inorganic growth through M&A, and attracting and retaining talent. The aim is to address some of the challenges faced by the government.
The company is constantly advancing its technology and has recently become a leading pioneer in artificial intelligence.
“This capital will allow us to rapidly advance our investments in advanced technology solutions, particularly AI,” said Matt Armanino. “We have seen an increasing desire from our customers to deploy real-world applications for their AI solutions, and we have been at the forefront of automation and AI since the beginning. , we developed our AI Lab several years ago, and solution-driven solutions to address our innovative AI customers’ most pressing challenges remain a top priority for us.”
Beyond investing in technology, the company plans to continue its aggressive M&A strategy, which has resulted in 19 acquisitions since 2019.
“These transactions have allowed us to expand our capabilities, enter new markets and deliver greater value to our customers,” Armanino said. “And we think we can accelerate that with this capital structure.”
Through past M&A, the company has acquired a lot of fresh talent, but these days no company has enough talent. This is the third purpose of the new capital.
“We think there’s still a lot of ripe talent left across the country,” he said. “We believe this capital will support our efforts to attract, retain, develop and reward top talent by investing in the talent that drives our entrepreneurial spirit.”
The deal will allow the company to reward top talent, for example through an equity plan that will allow the company to expand its ownership culture beyond its traditionally limited group of partners.
“In many cases, for our most senior employees today, there is no natural mechanism for coordinating their efforts towards the success of the company and increasing its value, and how that ultimately rewards them. ,” Armanino explained. “And we’re very pleased that we have new mechanisms and plans in place that allow us to do that well and effectively extend the benefits of ownership and that culture of ownership to our most senior employees. I think so.”
“Finally,” he added, “we talk about our innovative culture, and that’s a big part of our brand, but Capital is a place where we believe in great ideas, entrepreneurial ideas, true to society.” You’ll be able to say “yes” more often to initiatives that make a difference. Serve our customers and distinguish us as a leader in this industry. ”
