Teneo 'in advanced talks' for Deloitte's UK restructuring arm

The continued saga regarding Deloitte’s UK restructuring business took another turn at the mid-point of February, months after Deloitte’s global leadership supposedly ruled out such a move. The news sees public relations advisory Teneo apparently on the verge of purchasing the practice for “hundreds of millions of pounds.”

In 2020, Deloitte’s UK restructuring practice was engaged in a bumper workload, overseeing company voluntary arrangements for high street chains including New Look, and winning roles as administrator to fashion brand Victoria's Secret UK and sportswear retailer Go Outdoors, among others. In spite of the heightened demand experienced by the restructuring wing, however, early September saw Deloitte reported as mooting a sale of the division.

The rumours stemmed from sustained pressure on the UK’s largest audit and advisory firms from the nation’s audit watchdog the Financial Reporting Council (FRC), which effectively banned the foursome from conducting advisory work for audit clients in the wake of a number of accounting scandals. This split left many in the Big Four firms feeling the conflicts issue would inhibit the future growth of restructuring operations for as long as they are owned by them – leading them to consider cashing out.

Initially, it was reported that Deloitte’s global leadership torpedoed the UK wing’s potential sale of the restructuring wing – however, just months later, it appears to have performed a surprise U-turn. As reported by Sky News, Teneo, which has been backed by the private equity firm CVC Capital Partners since 2019, is in advanced talks to acquire the Deloitte business – though neither firm has commented on the story as of yet.

Teneo is a public relations and advisory company. Founded in June 2011, the firm provides a full range of management consulting services to many of the world’s largest companies, and currently has more than 800 employees. It sold a majority stake to CVC Capital Partners, at a total valuation of around $700 million, and the firm looks set to put a sizeable chunk of that to work in purchasing Deloitte’s restructuring business, which analysts told Sky News was likely to cost Teneo, "in the low hundreds of millions of pounds."

Led by Daniel Butters, Deloitte’s UK restructuring business handles insolvencies, which can generate fees for individual mandates running into millions of pounds, along with other forms of corporate restructuring and accelerated sale processes. The unit employs a total of 350 people, including 30 partners, and amid the global economic downturn and coronavirus pandemic, it has seen business booming in recent months.

Private equity experts are increasingly perceiving the financial profile of businesses providing restructuring services as attractive, as the UK economy grapples with the fallout from the Covid-19 crisis. To this end, Teneo has also bought a number of smaller restructuring firms, including Goldin Associates in the US and Credo in the UK, and this proposed deal is said to be attractive to the company because it will further help it extend its business beyond its core communications consulting activity.