5:58 p.m. | Updated
K2 Intelligence, the investigative company started by Jules Kroll and Jeremy Kroll, has acquired the corporate intelligence firm Thacher Associates, in a deal that highlights the growing and lucrative business of internal investigations and corporate monitoring.
Thacher, which is based in New York, is a leading player in the business of overseeing large-scale construction projects to protect against fraud.
The deal, which is expected to be announced on Thursday, underscores the prevalence of private watchdogs not only in the building industry but also across corporate America. Both government regulators and large companies are increasingly looking to independent overseers to monitor businesses for possible wrongdoing.
With greater prosecution of financial laws and enhanced government regulation, companies today are increasingly using investigative firms like FTI Consulting and Nardello & Company 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, K2’s chief executive.
Recent cases highlight how the government’s increased oversight — especially in financial services — has resulted in the need for corporate baby sitters. The banking giant Standard Chartered, based in London, recently agreed to a demand by New York officials that it hire an outside monitor to ensure compliance with United States 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 internal corruption. Mr. Kroll expanded 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 company Altegrity.)
Mr. Kroll and his son, Jeremy, left Kroll in 2008 and the next year started K2, which now employs about 120 people.
K2’s deal with Thacher — the terms of which are not being disclosed — is the first of a number of acquisitions that K2 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 developments. Prominent assignments handled by Thacher include the cleanup of the World Trade Center site, the building of the new Yankee Stadium and the construction of the Bank of America office tower in Midtown Manhattan.
Thomas D. Thacher II, the company’s chief executive, said that combining with K2 would provide a platform to expand Thacher to new locations. Mr. Thacher’s business developed in the 1990s when Mario M. Cuomo, then governor, sought to eliminate graft and corruption in the New York construction industry. 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.”
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 the nation’s infrastructure has become a focus, as has updating the electricity grid.
“There is a high likelihood of fraud, waste and abuse at large-scale construction projects not just in the tristate area, but all across the country,” Jeremy Kroll said.