It’s rare we write about $40 million firms over here as we focus on the behemoths of professional services but we’re writing about ATA Partners’ recent deal with Copley Equity Partners today because the private equity deals are coming hard and fast and unlike the happenings of small firms, that’s something we’re interested in. Is PE going to buy up the entire top 200? Is there a floor at which private equity won’t be interested in gobbling up a tiny tax shop? We’ll have to wait and see.
According to INSIDE Public Accounting, ATA will retain majority control and no leadership shakeups are expected. “Through its partnership with Copley Equity, ATA will enhance its talent, technology and internal operations as well as continue its long-term plan of exploring strategic acquisition and growth opportunities,” IPA said. According to ATA’s website, the firm has 25+ partners and 200+ staff in multiple offices across Tennessee, Kentucky, Arkansas, and Mississippi.
“In planning for our future, ATA sought a capital partner who could help the company expand our service offerings, grow into additional markets, and continue to improve our tools and people resources. We are very excited to partner with Copley Equity, which brings a strong track record of supporting the growth of the companies with whom they partner,” said John Whybrew, ATA managing partner at ATA since 2016.
“Combining deep technical expertise with strong community relationships, clients choose to work with ATA year after year,” said Peter Trovato, managing director of Copley Equity. “These attributes have made ATA a leading growth platform in the attractive accounting services market. We are excited to support ATA as it continues to recruit top talent, invests in technology solutions, expands into new geographies and broadens its service offerings.”
“Our investment in ATA is the culmination of a multi-year search for a partner in the accounting services space,” said Sean Sullivan, vice president at Copley Equity. “Among the hundreds of opportunities we reviewed during that process, ATA was a clear standout. We look forward to working with ATA across a range of strategic initiatives in the coming years.”
Copley Equity says it takes an “industry agnostic” approach and focuses on lower middle market companies. Specifically:
- Private companies generating $2 to $25 million in earnings or free-cash flow
- Typically founder owned and operated with strong management
- A stable revenue base often with recurring characteristics
Terms of the deal weren’t disclosed but Copley says on their website they invest $5 to $75 million in equity per transaction so we assume it’s somewhere in that large window. They’ll throw the right company some money for growth capital, owner liquidity, acquisition financing, or debt retirement. It appears this is the first accounting firm in their portfolio.
“Our unique capital base allows us to invest in companies that do not fit the venture capital template and are typically ‘too small’ for traditional middle-market private equity firms,” says the 12-year-old private equity firm. Pitchbook profile here should anyone care to do a deeper dive.
We know some PE firms are buying large firms with the intent of expanding them through acquisition of smaller firms. So I could see other PE firms buying up the smaller firms and then shop them as potential targets.
I’m sure. We joke but some of these smaller firms are probably a good buy for PE. The well-managed ones are already streamlined, have good clients, decent tech. Shouldn’t be hard to grow them up a little and then unload for decent gains.