Courtesy of Wipfli LLP

Wipfli’s infusion of private equity funding from New Mountain Capital promises to help the firm expand, while still retaining the partners’ control over the firm.

On Friday, the firm announced the new funding, in which New Mountain is getting a 40% stake in Wipfli.

“The firm has been strategically looking at the opportunities by which private equity could be helpful to our firm, and have been thinking about how to accelerate the momentum that we’ve had to this point with the adrenaline shot that is our capital partner,” said Wipfli managing partner Kurt Gresens. 

New Mountain Capital has previous experience in investing in an accounting firm, having previously bought a majority stake in Citrin Cooperman in April 2022, before selling its stake to Blackstone, and also buying a majority stake in Grant Thornton in March 2024. 

“New Mountain has been somebody that we’ve known for a long time,” said Gresens. We’ve watched them from afar. We’ve also gotten to know them over the last period of time here, so that we became and remain really excited about our partnership together, and the fact that they made a minority investment in us too was attractive to us in the sense that it allows us to work together from a position of strength. They believe in the strength of our leadership, the trajectory of growth that we have, and the differentiating market position that we had, and we appreciated that they had seen that in us as we got to know each other over the course of time.”

The relationship will be different from the one with Grant Thornton. “The fact that we’re obtaining a minority investment from them, we’re pretty excited about as well, in the sense that allows us to continue to be on the offensive, to have the partner-led orientation of the firm, whereby the partners are in a majority position with respect to their minority and being partner led is an important characteristic that New Mountain also felt was one that they could see benefit from investing in,” said Gresens.

The minority interest will enable Wipfli’s partners to retain control, with input from New Mountain. 

“We look forward to their expertise and their understanding of not only accounting firms, but human capital businesses in general, and the fact that they can be additive partners to the track record that we have on ensuring great client service, people are going to be positively affected in our judgment from this,” said Gresens. “And they saw that. They saw the innovation aspects of what we’ve got going on here, and being in majority control allows us to have that partner-led benefit while still benefiting from the expertise and the value that a capital partner like them can bring to us.”

Wipfli has heard from other private equity firms over the years. “We did talk to a lot of different potential partners out there,” said Gresens. “Their track record in supporting growth generally as a firm and with respect to previous investments that they made, was one that was attractive to us, while still being people centric and ensuring the quality of audits and other services that we provide are well attended to. Customer satisfaction and client loyalty are of paramount importance to us too, and they saw that, and we expect that to continue and to be benefited from what they bring from that aspect.”

Wipfli is unlikely to merge with Grant Thornton as a result of the investment. “There is no intention for us to combine Wipfli and Grant Thornton together,” said Gresens. “New Mountain has made those investments and currently holds an existing investment in Grant Thornton. The benefit of that is clear, that the experience, the commitment they have to us to our profession is high as a result of that, and there’s a lot of positives from that. We are going to be our own platform firm for New Mountain. Grant Thornton partners own a minority of the firm, whereas we’ll own a majority of the firm, and we have a differentiated market position. The clients that we seek to serve that are a best fit for Wipfli are a bit different than what we view and New Mountain views Grant Thornton’s to be, and that differentiated market position is an aspect of why I have confidence that the relationship between Grant Thornton and Wipfli will be the same as it was prior to our transaction. There’s no intention to merge. We’re friendly competitors. We’ll continue to be, and we respect Grant Thornton for all the success they’ve had. Yet our success has been positive as well, and we’ll continue on our strategic futures independent of each other.”

Once the transaction closes, Wipfli will operate in an alternative practice structure, as is common with private equity funding of accounting firms. Wipfli LLP, a licensed CPA firm, will  provide attest services — while Wipfli Advisory LLC, which will not be a licensed CPA firm,  will provide business advisory and non-attest services. The investment in Wipfli will come through New Mountain’s Strategic Equity effort where New Mountain makes noncontrol investments in companies and firms. The investment in Grant Thornton comes out of a separate fund where New Mountain makes majority investments. Gresens said he’s unaware of what other firms New Mountain might invest in from the two funds.

“We are a platform firm in this fund that they’re going to be making the investment into us, whereby they’ll be about 40% in our go forward future,” he added.

He declined to disclose the exact terms of the deal, but confirmed that the valuation for the firm was north of $1 billion.

As for how he’s going to be using the extra funding, he plans to expand the firm, which frequently does mergers and acquisitions, “There’s a number of strategies that we intend to bolster our previous and current momentum and accelerate our current strategies with,” said Gresens. 

“We’ve been a fairly acquisitive firm,” Gresens added. “In the last 10 years or so, we’ve done 35 combinations, thereabouts. In the last five or six years, we’ve done 18 combinations. And we are excited about the opportunity to continue to be a participant in the industry’s continued consolidation and excel and accelerate the strategy on an M&A front as well. We’ve been strategically doing that for a while. We’ve been on the offense as it relates to that topic, especially in the last five or six years.”

Gresens also  plans to use some of the funding from the PE deal on technology investments. “All while we’ve been doing that, we’ve been staying attentive to our clients and bringing the best capabilities to our clients in the middle market space, as well as ensuring that the technologies that we have to support them and support our people are the best technologies as well,” he added. “When you look at the technology aspect, certainly this investment from New Mountain positions us well to accelerate investments that we have been making in all things technology as well as people. I’m looking forward to the future with the continued momentum around M&A, around all things technology and investments in the people as well, all of which is intended to make sure that we’re bringing greater value to our clients, and ultimately greater opportunities for our people too.”

Wipfli is likely to expand into new markets. “We have a multipronged strategy to invest in new or deeper penetration into geographies that we’re not in or should be larger in,” said Gresens. “As an industry-oriented firm, we want to make deeper investments in some of the industry based clients that we serve, to broaden our capabilities and deepen our capabilities in the different industries we serve. And then, thirdly, it would be our service capabilities. We are a proud firm that has nearly 50% of our revenue that comes from what would be broadly defined as advisory and consulting, and the remainder, greater than just over 50%, is all things audit and tax, but we want to continue to invest in expand and the capabilities, primarily the advisory and consulting capabilities that our middle market clients want and need to ensure we’re bringing value to those clients in those ways. We want to grow and accelerate our audit and tax practice too, but incrementally, we see our advisory and our consulting practices being part of our M&A strategy especially, too. So from a geographic perspective, there’s many parts of the country that we should be, that our platform will be a good model to expand into other parts of the country.”

He noted that the Wall Street Journal wrote about Wipfli perhaps expanding in the South and the Southwest.

“We also have other parts of the country, like the Rust Belt, where we have the opportunities for our platform, for our model, to be beneficial to firms and clients of those firms in those areas of the country too,” said Gresens. “Those would be just a few examples, but we look to grow within the United States generally.”

He looks forward to the possibilities ahead for the accounting profession. “It’s an exciting time to be in the profession,” said Gresens. “There’s a lot of positive signs of growth in our profession. The profession is changing how we think about bringing value to clients. We’re certainly thinking about that. We’re redefining what it means to be an accountant for our clients, whether it’s a small general contractor or a local health clinic or a 500-person manufacturing facility, so it’s a really exciting time in the profession, and this partnership that we have here will enable more of that growth for the firm, to make Wipfli even more unique compared to how we’ve already been uniquely positioning with our service capabilities, and investing in our people more. This capital structure allows us to remain on the offensive as it relates to the opportunities for our people and our clients into the future.”