K2 Intelligence, the investigative business started by Jules Kroll and Jeremy Kroll, has acquired the corporate intelligence firm Thacher Associates, a deal highlighting the growing and lucrative business of internal investigations and corporate monitoring.
Thacher, which is based in New York, is a leading player in the niche business of overseeing large-scale real estate development projects on behalf of governments and developers to ferret out corruption in the construction process.
The deal, which is expected to be announced on Thursday, underscores the prevalence of private watchdogs not only in the building industry but across corporate America. Both government regulators and large companies are increasingly looking to independent overseers to monitor businesses for possible wrong doing.
With stepped-up prosecution of financial laws and enhanced government regulation, companies today are increasingly using investigative firms like FTI Consulting and Navigant Consulting to supplement their own in-house compliance and legal programs. In a sign of the business's appeal, the law firm Pepper Hamilton last year acquired the investigative group run by Louis J. Freeh, the former director of the Federal Bureau of Investigation.
“We look at the heightened regulations that companies face every day, and see the increased need for independent experts to assure regulators and law enforcement that their requirements will be fulfilled,†said Jeremy Kroll, the chief executive of K2.
Recent cases highlight how the government's increased oversight - especially in financial services - has resulted in the need for corporate babysitters. The London-based banking giant Standard Charter recently agreed to a demand by New York officials that it hire an outside monitor to ensure compliance with United States anti-money laundering laws. And the Justice Department forced another big bank, HSBC, as part of a deferred prosecution agreement relating to various financial crimes, to hire a corporate monitor for a five-year period.
Kroll is a big name in the global investigations industry. In the 1970s, Jules Kroll helped pioneer the business of helping corporations improve their operations by uncovering fraud and other forms of corruption in their business. Mr. Kroll grew its business rapidly, embarking on a series of acquisitions and diversifying into areas like litigation support and data recovery. In 2004, Marsh & McLennan purchased Kroll in an all-cash deal worth $1.9 billion. (Marsh sold Kroll in 2010 to the global security firm Altegrity.)
Mr. Kroll and his son, Jeremy, left Kroll in 2008 and the following year started K2, which now employs about 120 people.
K2's deal acquisition of Thacher - the terms of which are not being disclosed - is the first of a number of acquisition that the firm hopes to make in the near-future, Jeremy Kroll said. Mr. Kroll acknowledged that in some ways, K2's planned expansion mirrors the growth strategy executed by Kroll.
In acquiring Thacher, K2 adds a profitable niche of “construction integrity monitoring,†or providing oversight to big real estate development projects. High-profile assignments handled by Thacher include the World Trade Center site clean-up, the building of the new Yankee Stadium, and the construction of the new Bank of Amer ica office tower across in Midtown Manhattan.
Thomas D. Thacher 2d, the firm's chief executive, said that the combination with K2 will provide a platform to expand the business to new geographies. Mr. Thacher's business developed in the 1990s when then-Gov. Mario Cuomo sought to root out graft in New York construction projects. A former assistant district attorney in Manhattan, Mr. Thacher served as inspector general of the New York City School Construction Authority before starting his firm.
“We've reached a point where we get calls from all over to work on projects and we don't really have the infrastructure to support that,†said Mr. Thacher, who is known as Toby. “By joining forces with K2, we make our services both nationally and internationally.â€
The thinking behind the deal is that what has primarily been a New York-area business has the potential to grow, especially at a time when rebuilding of the nation's infrastructure - its bridges, roads, and tunnels - has become a focus, as has updating the electricty grid.
“There is a high likelihood of fraud, waste and abuse at large-scale construction projects not just in the tri-state area, but all across the country,†Jeremy Kroll said.
