KPMG agrees to management buy-out of UK pensions division

09 December 2019 Consultancy.uk

KPMG has agreed a deal for the buy-out of its UK pensions division, which will continue to serve clients under the ownership of its current management team. The management buy-out is understood to have been backed by Exponent Private Equity, the private equity firm which entered into exclusive talks with KPMG for the purchase in October.

In recent months, KPMG has been conducting a continuous restructuring of its UK operations. The Big Four firm sunk a £45 million investment into its Audit arm in order to beef up quality, following revelations that KPMG had carried out deeply flawed audits at a number of clients in the UK. Following a slowing of revenue growth, KPMG also announced it was set to downsize its Partner count by around one-tenth.

Further to all this, in July it was first suggested that KPMG was flirting with the idea of offloading its pensions consulting unit. The division employs about 20 partners and 500 people and works for some of UK’s largest pension companies, holding around £50 billion of pension assets under advice. 

KPMG agrees to management buy-out of UK pensions division

After initially holding discussions with a number of interested parties – including Lane Clark & Peacock and Duff & Phelps – by October, KPMG had picked out a viable candidate for exclusive merger & acquisition talks. According to Sky News, Exponent Private Equity – an investor that has previously backed companies such as vegetarian food producer Quorn and Loch Lomond Distillery – was expected to be chasing a deal worth in excess of £200 million. Now, just over a month later, news has broken that the private equity group has sealed the deal.

Exponent – established in 2004 – specialises in companies headquartered in the UK and Ireland, with enterprise values of between £100 million and £400 million. It currently owns stakes in discount website Wowcher, daily newspaper The Racing Post, and sightseeing organiser Big Bus Tours, among others, and is providing the funding for KPMG’s current pensions division management team to buy-out the practice. No official figures relating to the sale have been released, though the price tag of £120 million has been floated by various outlets – and if true, this would be significantly less than the initial figure bandied about.

The deal has seen KPMG sign a conditional agreement with NewCo, a vehicle through which the 20 Partners and 500 staff currently employed by KPMG will carry on the business once the sale is completed. The move will install KPMG UK Head of Pensions Andrew Coles as NewCo’s Chief Executive Officer.

In a statement, KPMG said, “The company will announce further details upon completion.”


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