We would have published this earlier were it not for a once-in-two-decades downtime issue when the story broke on Tuesday. So we’re doing it now.
As teased by WSJ earlier this month, Baker Tilly and Moss Adams are in fact combining (or, depending on how you look at things, Baker Tilly is buying Moss Adams and integrating its life force into the host). Naturally, WSJ had the full scoop:
Accounting firms Baker Tilly and Moss Adams agreed to merge in a deal valued at roughly $7 billion, which would make it the largest firm in the industry to be partly owned by private-equity investors.
The combined firm, which would be the sixth-biggest accounting firm in the U.S., will carry the Baker Tilly name, specifically Baker Tilly US on the audit side and Baker Tilly Advisory Group on the nonaudit side. The Wall Street Journal previously reported the two firms were in advanced talks.
Currently, the sixth-largest firm in the US is BDO at $2.9 billion, according to the 2024 IPA Top 100. Baker Tilly and Moss Adams sit at 10 and 14 on that list with $1.7 billion and $1.3 billion in revenue, respectively. Combine those and you’re looking at almost $3 billion, $2,978,700,000 to be exact, still a billion shy of RSM’s $4 billion.
Baker Tilly’s existing private equity backer Hellman & Freeman will make “a meaningful additional strategic investment in the business.” It’s said, though not officially confirmed as far as we know, that H&F put $900 million into Baker Tilly when they did their deal — along with some cash from Valeas Capital Partners — for a 50% stake in BT last year. An H&F partner told WSJ they are “approximately doubling” their investment, you can do the math.
WSJ said Moss Adams CEO Eric Miles and Baker Tilly CEO Jeff Ferro said the combined new firm aims to generate about $6 billion in annual revenue by 2030. Which, by the way, is only four and a half years away.
Because private equity is involved the “merger” will result in multiple businesses under the same banner. According to the press release put out after WSJ’s story, Moss Adams and Baker Tilly’s audit business will combine as Baker Tilly US, LLP and the firms’ business advisory, tax and other services will combine under Baker Tilly Advisory Group, LP (BTAG). Both entities will remain partnerships, with all principals holding equity alongside H&F and Valeas in BTAG.
Let’s see what else the press release had to say:
In a transformative move that redefines advisory and accounting services for the middle market, Baker Tilly and Moss Adams today announced their planned combination to create the sixth largest advisory CPA firm in the US. Expected to close in early June of this year, the combination strengthens the firms’ industry specialization, expands its geographic reach and enhances its capabilities across advisory, tax and assurance services.
With complementary strengths and a shared commitment to client success, Baker Tilly and Moss Adams will unite under the Baker Tilly name, forming a leading firm positioned to help middle-market businesses navigate an increasingly complex environment. Jeff Ferro, CEO of Baker Tilly, will serve as CEO of the combined firm through his retirement, with Eric Miles, currently Moss Adams CEO, named CEO-elect. Miles will assume the role of CEO on January 1, 2026, with Ferro remaining a director on Baker Tilly’s board thereafter.
OK so Moss Adams gives up their name but their CEO gets to be king.
“Since we invested in Baker Tilly, we have been focused on building a differentiated firm with the ambition to change the game in the middle-market accounting industry,” said H&F partner Blake Kleinman, cheesily. “This landmark merger between Baker Tilly and Moss Adams is an important step in creating a firm that will be the destination of choice for the industry’s best talent and for firms considering their strategic options in a rapidly evolving sector.”
Yes, we’ve heard the industry’s best people are very eager to work at firms with this much private equity in the mix. Just beside themselves with eagerness.
Here’s an interesting bit from an interview WSJ did with the involved parties as part of the news. TLDR: Baker Tilly partners and principals will be putting up equity of their own, something Jeff Ferro acknowledges is unique in these deals.
WSJ: How is the private-equity ownership of Baker Tilly changing with this merger?
[H&F partner Blake] Kleinman: All of the existing Baker Tilly shareholders—H&F, Valeas and importantly, the BT principals and partners—will be making meaningful new equity investments to facilitate that. The partners of the firm will actually have a majority ownership of the business.
We’re approximately doubling our equity investment, but our pro forma ownership will go down a bit. We’re meaningfully increasing our total investment in the company and our bet on the sector, albeit we’ll own slightly less. It’s a little bit the way the math worked out. Having significant partner ownership alongside us just creates the alignment between the financial sponsors and the partners that are really driving the value of the business. That positioning as a majority partner-owned firm will be attractive and differentiated from a recruitment perspective as we think about the next generation of talent that’s trying to decide where to build a career.
[Baker Tilly CEO Jeff] Ferro: H&F and Valeas [which collectively will now own less than a 50% stake] are giving the Baker Tilly partners an opportunity to increase our investment, which shows the enormous amount of support for the partner group from the private-equity perspective. I’ve not seen that as being a normal procedure that private equity would do.
Will smaller firms make this a trend? Will Baker Tilly+ really have its pick of partners going forward? Time will tell.
