The boss of KPMG UK’s restructuring division has pledged to go on an acquisition spree to expand into new business lines and countries once it completes its divorce from the Big Four firm.
The business, which will be renamed Interpath Advisory, is expected to formally part ways with KPMG on Tuesday after private equity group HIG Capital struck a deal in March to buy the 550-person operation.
The sale, which was for between £350m and £400m according to people with knowledge of the deal, comes as the Big Four — EY, PwC, Deloitte and KPMG — fight to win enough work to satisfy star partners while avoiding conflicts of interest between their audit and advisory divisions.
It is the second disposal of a UK restructuring practice by a Big Four firm this year after Deloitte sold its division to US communications and advisory group Teneo in February for an undisclosed fee.
Blair Nimmo, a KPMG veteran who will be chief executive of Interpath, said he hoped the business would double in size “in the next three to five years”. The new company would focus on building expertise in areas including debt advisory, tax and forensics, which involves identifying fraud and misconduct, as well as expanding into Europe, Asia and the Middle East, he said.
“My gut feeling is that the first two or three months will be [about] settling the business down out of KPMG and then . . . we will crack on and pursue that growth,” said Nimmo, who will run Interpath with two other senior partners, Will Wright and Mark Raddan.
Any expansion was likely to involve a mixture of hiring individuals and teams from other firms as well as buyouts, which could deliver growth more quickly, he added.
KPMG’s restructuring practice, which had 22 partners and revenues of £130m in the 12 months to September, has a strong reputation in mid-market insolvency work in the UK. But, shorn of its place in KPMG’s international network, it could struggle to win big-ticket, cross-border work as an independent firm unless it can build a global presence.
“If they stayed [at KPMG], they were going to continue to be stymied by bureaucracy, low profitability [and a lack of] independence,” a senior partner at a rival independent insolvency practice told the Financial Times. “But the really juicy stuff is all the international pieces and now they can’t do it . . . they’re materially weakened by [leaving].”
But Nimmo said the business had missed out on “huge levels of work” from distressed companies because of conflicts with other parts of KPMG’s operations.
“In any large FTSE 100 or FTSE 250 business, KPMG, like any big firm, will have a number of touch points even if it’s not the auditor,” he said. “If you know your hand is tied behind your back and you can only patch up on the park for six games out of every 10, does that make you want to stay?” he added.
In recent years, KPMG’s restructuring team has worked on the administrations of Monarch Airlines and shopping centre owner Intu as well as on the liquidation of Thomas Cook’s retail division.
But it was excluded from lucrative work advising on the insolvency of government contractor Carillion because KPMG audited the company before it became insolvent in January 2018.
The firm is now facing a possible fine from the accounting regulator for failing to raise red flags before Carillion collapsed with £7bn of liabilities and just £29m of cash.
Interpath would continue to use KPMG’s offices on an interim basis but planned to establish five main hubs in London, Birmingham, Manchester, Leeds and Glasgow along with six smaller sites around the UK, Nimmo said.
KPMG’s former pensions advisory division, Isio, said in March that it had won work from 35 of the firm’s audit clients in its first year since becoming an independent business through a £200m private equity-backed buyout.
Credit: Source link