Smith + Howard receives strategic investment from Broad Sky Partners

Smith + Howard, an Atlanta-based accounting and consulting firm, has received a strategic investment from Broad Sky Partners, a New York-based private equity firm focusing on mid-market business services and consumer companies. Financial terms were not disclosed.

Smith + Howard was founded in 1971 and has more than 130 employees, according to LinkedIn. The firm provides services in accounting, assurance, tax, and advisory. The firm’s advisory services include internal audit, litigation support, process automation, cyber risk assessment, financial due diligence, and tax due diligence.

The transaction represents Broad Sky’s third platform investment since its founding last year. The firm’s other companies are Thomas Scientific, a distributor of lab supplies and scientific equipment, and Fair Harbor, a sustainable apparel brand.

Because audit firms cannot be majority-owned by non-CPAs, Smith + Howard will take on an alternative practice structure – as in the case of EisnerAmper’s private equity purchase last year. Smith + Howard PC, a licensed CPA firm, will continue to provide audit and other attest services to its clients, while Smith + Howard Advisory LLC will provide tax, accounting, and advisory services.

Broad Sky will aim to accelerate the growth of Smith + Howard’s advisory services, geographic footprint, and technology solutions.

“We see significant tailwinds at the intersection of outsourcing, workforce virtualization, and advisory services,” said Adam Glucksman, partner and leader of business services investments at Broad Sky, and previously a managing director at The Carlyle Group. “The accounting and financial advisory services landscape is a rapidly evolving space we’ve been watching for a long time. We look forward to working with the talented Smith + Howard team to lead through expanding our service offerings.”

Sean Taylor, CEO of Smith + Howard, added, “Broad Sky’s recognition of the unique value of Smith + Howard speaks strongly to what those who came before us established, to what our current team is developing, and to a very bright future for decades to come.”

Allan Koltin, who served as exclusive financial advisor on the deal, spoke at length about the increasing entry of private equity into the accounting firm arena in a November 2021 interview with the Journal of Accountancy.

Koltin noted that accountancies are drawing PE interest for a number of reasons. The accounting profession is viewed as fairly recession-proof, which is a bonus as the global economy heads for a likely recession in 2023. Accountancies are also low-risk businesses with positive cash flow. Finally, Koltin says PE firms view accountants as being trustworthy and possessing ethics and high integrity.

In the interview, which followed the landmark private equity purchase of top 20 accountancy EisnerAmper, Koltin said PE firms were mainly looking at firms from $100 million to $700 million in annual revenue.

Smith + Howard is the #116 firm on IPA’s list of the largest US accountancies, with $36.7 million in annual revenue.

For a newer and smaller PE firm like Broad Sky, Smith + Howard is apparently of an adequate size to serve as a platform for future bolt-ons – especially in higher-margin and higher-demand business and technology consulting services.