Big Four firms PwC and EY have insisted they have no plans to follow in the footsteps of rivals KPMG and Deloitte and sell the restructuring units of their businesses.
Selling restructuring units is in vogue at Big Four firms. This morning KPMG announced it had signed an unconditional agreement with private equity firm HIG Europe to sell its restructuring practice, and the week before that global advisory firm Teneo announced it had agreed to acquire Deloitte’s restructuring services business.
The deals, combined worth hundreds of millions of pounds, will see partners and staff from the two Big Four firms move to new businesses. In KPMG’s case, senior bodies at KPMG will head up a new restructuring firm created as a result of the deal, which will enter the market as the largest independent restructuring and turnaround business in the UK.
But neither PwC or EY are interested in following such a path. Both firms confirmed to City A.M. they would not be selling their restructuring units.
The news could come as a surprise. KPMG made it abundantly clear the reason it sold its restructuring arm was because it felt it could not grow that part of its business due to existing conflicts of interest in the market, something it said affected “Big Four firms like KPMG”.
In a statement released this morning, KPMG said: “The increasing number and unique complexity of multiple stakeholders in distressed and stressed situations has made the navigation of conflicts of interest ever more complex for Big Four firms like KPMG, which have audit or non-audit relationships with almost every large and medium-sized business across the UK.
“With this situation only anticipated to intensify in the future, and with such developments likely limiting the growth of the firm’s restructuring business, the decision to commence a sale process was taken last autumn.”
‘Categorically not for sale’
Speaking to City A.M., Steve Russell, PwC’s head of restructuring, said the giant’s restructuring arm was “categorically not for sale”.
Russell said conflicts of interest in the market meant PwC faced some restrictions on the work its restructuring arm could carry out, but that there was plenty of work still to be done.
“We have very robust and detailed processes around where we can and can’t act, and we go through that routinely,” he said.
“We accept of course there will be some times where you have restrictions, so for example Arcadia was an audit client of PwC, so we were never going to be able to take that insolvency appointment. However, there is a lot of work that is not conflicted and that we can absolutely do within the restrictions that are placed on us.”
Russell also pointed out doing a deal with a private equity firm would throw up different conflicts of interest to deal with.
Growth within restructuring was not an issue for PwC, he said, adding: “We believe that as restructuring situations get increasingly complex, international and require a breadth and depth of skills, there is absolutely a place for us to deliver that to our clients.
“If you think about the skills that you could draw on not only in the UK but across the globe that are increasingly needed by clients to deliver the solutions, then those are on-tap in our firm, and importantly we can call on them at the drop of a hat, because in restructuring situations speed is key. You might argue ‘well, you could mix and match’, and maybe, but could you do it fast enough? For us, the answer is yes.”
In a statement given to City A.M., EY said it was not looking to sell its restructuring business, which it described as “core” to both EY and EY Parthenon, its consulting business.
“Turnaround and restructuring strategy is 25 per cent of the business, with 900 professionals in EMEIA and 1,600 globally,” the firm said.
“Being part of EY and EY Parthenon means we are able to bring the full breadth of sector insight, skills, capability and geographic reach across the globe that our clients need, as we work closely with them across the economic cycles to create, protect and recover value.
“Our UK turnaround and restructuring strategy practice has grown by more than 40 per cent in the last three years and is our largest regional team in EMEIA with several hundred staff and over 50 Partners. We will also be announcing new senior hires over the coming months.”