Tuesday 2 March 2021 8:51 pm

KPMG 'to sell' restructuring arm in £400m deal

Big four accountancy firm KPMG is set to announce the sale of its UK restructuring arm in a deal worth £400m, according to reports, as the company braces for sweeping new audit reforms.

The division, which will be renamed Interpath Advisory, will automatically become the largest restructuring firm in the UK by employee count, Sky News reported.

Around 500 people are understood to be joining the new business, which will be backed by private equity firm HIG Europe.

Former Deloitte chairman John Connolly is said to be in talks to become Interpath’s chairman. Three of KPMG’s top restructuring partners in the UK — Blair Nimmo, Will Wright and Mark Raddan — are being lined up to hold senior management roles once an agreement is reached.

Rumours that KPMG was preparing to sell its restructuring arm first emerged last October.

In an email to colleagues the following month, former KPMG chairman Bill Michael said that conflict of interest concerns around the restructuring business’ existing work was likely to “limit the restructuring clients we can serve and constrain our ability to maximise the growth of this business”.

Michael resigned last month after a video surfaced online of the boss telling staff to “stop moaning” and “playing the victim”.

The firm’s restructuring business has acted as administrator to a slew of major high street casualties during the pandemic, including burger chain Byron, shopping centre-owner Intu Properties and Arcadia Group’s flagship Topshop store in London’s West End.

News of the sale comes just over a fortnight after Deloitte sold its restructuring division to PR and advisory giant Teneo.

Deloitte’s restructuring division, whose 350 employees made it one of the largest in the UK, acted on a string of high-profile insolvencies, including serving as administrator to Sir Philip Green’s retail empire.

It comes as Big Four auditors prepare to roll out “operational separation” of their audit and consulting businesses.

The Financial Reporting Council (FRC) ordered the firms to break up their audit divisions from the rest of their business last year amid concerns about companies mixing audit and lucrative consulting work for the same clients. 

The push to reform the audit sector follows a series of high-profile accounting scandals in recent years, including the collapses of BHS, Patisserie Valerie, and Carillion.

KPMG was Carillion’s auditor before its collapse in 2018, and will likely face a sizeable regulatory fine in the coming months as the FRC concludes its investigation into the construction giant’s demise.

However, a influential committee of MPs have warned that the proposed changes do not go far enough.

Members of the Business Energy and Industrial Strategy (BEIS) committee Jones last year urged ministers to outline a timetable for implementing a major shake-up to the sector, including plans to replace the FRC, which MPs have called “toothless”.

A white paper on audit reform is expected to be published by ministers in the next few weeks.

KPMG declined to comment.