Financial Services

HIG buys KPMG's UK unit amid Big Four shake-up

March 4, 2021
The Big Four auditors have until 2024 to functionally split their auditing practices from the rest of their businesses. (Sean Gallup/Getty Images)

KPMG has agreed to sell its UK restructuring business to HIG Europe as it readies itself for regulatory reforms aimed at the Big Four accounting firms.

The unit, reportedly valued at £400 million (about $556 million), recently acted as an administrator in the sale of fashion retail group Arcadia's flagship brand Topshop. The business will be renamed Interpath Advisory as it becomes the UK's largest independent restructuring and turnaround firm with over 500 employees across the country. Intermediate Capital Group and Epiris were also said to be eyeing the asset before HIG clinched the deal.

News of the sale comes two weeks after Deloitte agreed to sell its restructuring arm to CVC Capital Partners-backed consultancy Teneo. In both cases, the deal was intended to address perceived conflicts of interest where the firms are potentially doing audit and consulting work for the same clients.

"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," KPMG said in a statement, adding that the situation was only going to intensify in the future.

The Financial Reporting Council, the UK's auditor regulator, has given the Big Four auditors KPMG, Deloitte, EY and PwC until 2024 to operationally split their auditing practices from the rest of their businesses. The order followed the 2019 publication of an independent review launched after a succession of high-profile accounting scandals, among them the collapse of construction giant Carillion and UK department store BHS, which were audited by KPMG and PwC, respectively.

The industry shake-up is not over yet. The UK's new business secretary, Kwasi Kwarteng, is expected to publish another raft of audit sector reform proposals later this month, which may precipitate renewed scrutiny in the sector's major players.

The deal will see KPMG UK continue to provide all other advisory services, including debt advisory. It is expected to conclude next month.
 

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