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September 25, 2023

The Rothstein Kass/KPMG Merger Is Most Definitely On and Happening Soon, Says This

Hedge Fund Alert is subscription only so we don't have much but we do have this:

After months of rumors, big-four accounting firm KPMG has reached an agreement to acquire Rothstein Kass — a deal that will make KPMG one of the top three hedge fund auditors.

The deal could be announced within a week or so. While much smaller than KPMG, Rothstein Kass has a larger hedge fund-auditing practice, with 1,158 fund clients versus 904 for KPMG, according to Hedge Fund Alert’s Manager Database. That puts Rothstein Kass in fourth place among hedge fund auditors, behind No. 1 Ernst & Young, PricewaterhouseCoopers and Deloitte. KPMG ranks fifth.

And this:

Meanwhile, there’s talk that the pending deal will trigger departures from another hedge fund-focused accounting firm, Rothstein Kass. One source said 10% of the firm’s 76 partners won’t be offered jobs at KPMG. "There’s opportunity there" for rival hedge fund auditors to pick up talent, said an executive at Rothstein Kass. The same source said he expects Rothstein Kass to fetch a relatively rich valuation perhaps exceeding 125% of annual revenue, which Accounting Today pegged at $202 million for 2013. That would imply a price of $250 million or more, reflecting the profitability of hedge fund-related work. The transaction is expected to be structured largely as a transfer of KPMG equity to Rothstein Kass partners, discounted for any unfunded retirement-account obligations. Both firms declined to comment.

We have heard a few dates thrown around that have come and gone (4/15, 4/30, and 5/1) and so far, nothing from either camp so I wouldn't expect this to materialize as stated either. But you never know.

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