Grant Thornton International History

Address:
1 Prudential Plaza, Suite 800
130 East Randolph Drive
Chicago, Illinois 60601-6050
U.S.A.

Telephone: (312) 856-0001
Fax: (312) 616-7142

Website:
Private Company
Founded: 1924 as Alexander Grant & Co.
Employees: 21,879
Sales: $1.7 billion (2001)
NAIC:541211 Offices of Certified Public Accountants

Company Perspectives:

Grant Thornton focuses on the owner-managed and entrepreneurial businesses sector and continues to develop services and products tailor made to them. Research shows that these kinds of businesses require a particularly personal and commercial approach from their advisors. Grant Thornton's ambition is to be the first choice adviser for independent businesses wanting to develop internationally.

Key Dates:

1924:
Alexander Richardson Grant and William O'Brien found Alexander Grant & Co. in Chicago.
1938:
Alexander Grant dies.

1950s:The firm expands domestically and internationally.
1959:
Thornton Baker is established in the United Kingdom.
1969:
International firm Alexander Grant Tansley Witt is established.
1973:
William O'Brien dies.
1986:
Grant merges with U.K. accounting firm Thornton Baker to form Grant Thornton.

1990s:Grant Thornton expands into Africa, Asia, Europe, and Latin America.
2002:
After the Enron scandal, Grant Thornton grows by adding former Andersen offices and employees.

Company History:

Grant Thornton International is an accounting and management consulting firm serving private and public middle-market companies. With 50 offices in the United States and 650 offices in 109 countries, Grant Thornton is one of the largest accounting firms in the second tier, ranking just below the Big Four (Deloitte Touche Tohmatsu, Ernst & Young International, KPMG International, and PricewaterhouseCoopers). The international firm helps its clients with accounting, audits, tax matters, and business strategies in four service areas: compliance and audit assurance; international tax; corporate finance; and PRIMA (People and Relationship Issues in Management), a 12-point framework that identifies problems in family and owner-managed businesses and recommends potential solutions.

A Chip Off the Big Blocks: 1924-85

Alexander Richardson Grant was 26 years old and a senior accountant with a Cleveland accounting firm, Ernst & Ernst (later Ernst & Young), in 1924. This was during the "golden age," after World War I and before the Great Depression, when industry and finance expanded rapidly and the nation prospered under the leadership of President Calvin Coolidge. The young accountant had a vision of becoming a business leader in public accounting by committing his services to the middle market. He thus left the security of an established firm, joined William O'Brien, and they started their own business, Alexander Grant & Co. They built their firm in Chicago and set out to meet the accounting needs of middle market companies throughout the Midwest. Also about the same time, other large accounting firms were growing rapidly and sprouting similar offspring. A few years before, an accountant named Arthur Andersen left his Chicago employer, Price Waterhouse, to establish a new firm, Arthur Andersen & Co. Although Grant and Andersen would not live to see it, the two midwestern accounting firms were destined to join forces.

For the next three decades, Alexander Grant & Co. expanded its services to reach nationwide. The company survived the early death of 40-year-old Grant in 1938, and continued to thrive under the guidance of several new leaders. While the larger firms took on big clients, Grant stayed focus on the middle market. By 1961, the company established a national office in Chicago, enjoying revenues of more than $5 million. Meanwhile in 1959 in the United Kingdom, two regional accounting firms, Thornton & Thornton of Oxford and Baker & Co. of Leicester and Northampton, merged to form Thornton Baker. For the next 16 years, Thornton Baker attained more than 38 mergers, and as a result the firm was nicknamed "The Thundering Herd." Also during this time, other European firms were merging to form a company dedicated to the middle market. This competitive firm would later become known as Binder Dijke Otte & Co. (BDO) and would eventually surpass Grant to become the top organization serving the middle market.

Eventually the American company decided to branch out into the international market. During the 1960s the firm merged with companies in Australia, Canada, and the United Kingdom and formed an organization called Alexander Grant Tansley Witt. By the early 1970s William O'Brien had died, and Wallace E. Olson was in the driver's seat. In 1979 the accounting firm began an annual study that ranked the 50 states according to their "manufacturing climates." Based on polls of state manufacturing associations, Grant rated the states according to 18 factors such as taxes, qualified workforce, and state disbursements for highways. Although it received some controversial press, Grant continued to perform the study for the next two decades.

By 1980 Alexander Grant had joined 49 international accounting firms and formed a global network. Five years later the company merged with Fox & Co. and became the ninth largest accounting firm, moving one step behind the nation's "Big Eight." The firm had 80 offices and more than 3,000 employees.

Growth, Unrest, and Change: 1985-90

Many large accounting firms found themselves embroiled in lawsuits in the 1980s. One of the reasons, said Clemens Work in October 1985 for U.S. News & World Report, was that the growth of public accounting firms into large conglomerates created vigorous competition. In addition, because they were vying for some of the same clients, they had to reduce their audit fees, sometimes by 25 percent, to attract or keep their customers. By cutting costs, they also "cut corners on quality and put less time in the job," said attorney Stanley Grossman in Work's 1985 article. Accounting firms found themselves in the hot seat for other reasons, Work said. He explained that firms growing and diversifying their services into management consulting may create a conflict of interest because auditors could not be objective. Along with such Big Eight firms as Arthur Andersen and Price Waterhouse, Alexander Grant & Co. was scrutinized heavily for its audit practices, getting sued by the Securities and Exchange Commission (SEC) for fraud and negligence. The accountants contended that they were wrongly accused of crimes they did not commit. But whether the firms participated in shoddy practices or were caught up in misunderstandings, in a five-year period the Big Eight had paid $200 million to settle lawsuits.

Alexander Grant & Co. experienced one of its largest court cases in 1985 when one of its clients, E.S.M. Government Securities Inc., collapsed. The SEC sued a Grant managing partner for receiving $125,000 from E.S.M. officials to certify false financial statements; there were at least 11 other related lawsuits against Grant, amounting to about $1 million. The Grant partner was convicted and sent to prison. Among other lawsuits by related organizations such as shareholders of American Savings & Loan Association of Florida and a conservator of Home State Savings Bank, one was also filed by a trustee of E.S.M. who said that Grant's audit was negligent, covering up losses and creating false assets.

Following predictions that Grant would collapse from the weight of the scandals and financial instability, the firm fought hard to change its public image and institute new policies regarding auditing standards. In 1986 the company merged with U.K. accounting firm Thornton Baker, and the company changed its name to Grant Thornton. The company's efforts to rebuild and strengthen itself paid off. In 1990 the 52-office international firm had 300 public clients and revenues of $205 million. That same year, a new executive partner, Robert E. Nason, was appointed to "help Grant consolidate gains that have been made after [the] scandal four years ago," said Lee Berton on February 14, 1990, for the Wall Street Journal. Nason had been an employee of the firm for 23 years and was formerly the Midwest regional partner.

Steady Growth into a New Millennium: 1990-2002

During the early 1990s, the nation suffered an economic recession. To weather the storms of adversity and financial stress, many companies sought consulting help from firms such as Grant Thornton. As the recession weakened in the mid-1990s and the economy began to flourish, so did Grant Thornton. In 1997, after international trade barriers were lowered, Grant Thornton established international business centers in four major U.S. cities. The centers helped "small to mid-sized companies to develop business relationships in emerging markets around the world," said Caitlin Kelly for Accounting Today in January 1998. The markets included countries in Asia, Europe, and Latin America.

As Grant Thornton grew, it continued to maintain the pace of staying just behind the multibillion-dollar firms. In 1998 Grant Thornton began offering computer consulting services and remained competitive in this quickly growing niche. A company would hire an accounting firm to help them understand and implement new accounting software packages such as Smart Stream. By the late 1990s, the Big Eight had experienced several mergers and eventually became the Big Four. Grant Thornton followed as the eighth largest firm; BDO weighed in as the fifth largest international accounting and consulting organization and the largest firm serving the middle market. In 1999, PricewaterhouseCoopers LLP approached Grant Thornton with merger talks, but eventually the two companies decided not to merge. As the 20th century drew to a close, amid public Y2K fears of computer crashes and nuclear attacks, Grant Thornton boasted revenues of $380 million and the addition of a new CEO, Domenick Esposito. The Brooklyn, New York native had worked for the company for 20 years and was committed to dodging merger trends and preserving the company's independence.

In June 2000 Grant Thornton pulled out of a different kind of merger. It had been advising London's Oryx Natural Resources, which planned to merge with Petra Diamonds Ltd. Less than 24 hours before the merged company was going to sell their stock on the London Stock Exchange, Grant Thornton threatened to resign if the two companies proceeded with the merger. Oryx, said the British government, planned to mine diamonds to finance the Zimbabwean government, which was embroiled in a civil war in Congo. Grant Thornton said the merger was too risky based on "discussions with the regulatory authorities," said Alan Crowell of the New York Times.

A year later the nation, again, sank into recession, and Grant Thornton faced new challenges. In March 2001 the firm's executive committee asked CEO Domenick Esposito to resign because of disagreements about the direction of the firm. During Esposito's reign, Grant Thornton experienced revenues of $416 million and helped KPMG through its initial public offering. Two months after Esposito's resignation, David McDonnell was appointed the new worldwide chief. McDonnell was a 30-year Grant Thornton employee and had been the youngest ever U.K. national managing partner when he acquired that post in 1989.

However, the executive committee could not have predicted the direction the firm would take in the coming months. After the September 11, 2001, terrorist attacks in the United States, Grant Thornton and other accounting firms found their strength in either creating or updating disaster-recovery plans for small businesses. As businesses and the nation were trying to recover from the shock of the attacks, and the recession wore on, an enormous scandal, involving accounting firm Arthur Andersen, burst onto the scene. Energy giant Enron collapsed into bankruptcy, and their accountants (Andersen) were convicted of obstructing justice because the audit team destroyed important documents. Andersen crumbled, and Grant Thornton was there to pick up some of the pieces. By July 2002 Grant Thornton had acquired from the fallen Andersen: 7 offices, 43 partners, and 396 staff.

After the Enron scandal, public confidence in the accounting profession dropped to an all-time low. In response, Grant Thornton developed a "five-point plan to restore public trust" and asked other major accounting firms to embrace it. While the SEC and the American Institute of Certified Public Accountants (AICPA) also professed changes and new policies, Grant Thornton said that was not enough. The accounting industry had to do more to dispel any conflicts of interest between the firm and its clients. Grant Thornton's plan, they hoped, would provide the leadership to make that happen and "restore public trust and confidence in the accounting profession, which has historically served so ably to make the U.S. capital markets the strongest in the world."

Principal Subsidiaries: Grant Thornton, LLP.

Principal Competitors: American Express Tax and Business Services; BDO International; Moores Rowland; Ernst & Young; KPMG International; PricewaterhouseCoopers.

Further Reading:

  • Berton, Lee, "Grant Thornton Appoints Nason Executive Partner," Wall Street Journal, February 14, 1990, p. B10.
  • Cowell, Alan, "Diamond Miner Halts Stock Listing Plans," New York Times, June 13, 2000, p. C4.
  • "Grant Thornton," New York Times, January 7, 1986, p. D3.
  • "Grant Thornton Opens Int'l Business Centers," Accounting Today, January 6, 1997, p. 23.
  • "GT Draws Up Five-Point Plan for Major U.S. Firms," International Accounting Bulletin, March 28, 2002, p. 5.
  • Kelly, Caitlin, "Grant Thornton Combines Global Experience, Flexibility," Accounting Today, January 26, 1998, p. 20.
  • "McDonnell to Become Worldwide CEO at GT," International Accounting Bulletin, May 18, 2001, p. 3.
  • Somasundaram, Meera, "People: Insider CEO Plots Growth Course for Grant Thornton," Crain's Chicago Business, March 1, 1999, p. 12.
  • Work, Clemens P., "Accounting's Bottom Line: Big Troubles," U.S. News & World Report, October 21, 1985, p. 58.

Source: International Directory of Company Histories, Vol. 57. St. James Press, 2004.