HIG Europe closing on £400 million KPMG restructuring deal
Weeks after reports emerged that Deloitte was closing in on a deal to sell its restructuring arm, news has broken that KPMG is similarly nearing the sale of its restructuring business.
Reports in the British press suggest the deal could see private equity firm HIG Europe purchase the practice for around £400 million.
At the start of the year, rumours were circulating that the sale of the business was progressing at pace, with prospective bidders speculated as including private equity firms Intermediate Capital Group and Towerbrook. However, HIG Europe has seen off rival bids and is in detailed negotiations to acquire KPMG’s restructuring wing, according to Sky News.
Private equity has been taking a heightened interest in restructuring consultancies of late, as their workload booms in response to the coronavirus lockdown and recession. With the current environment pushing many companies to the brink of collapse, investing in corporate recovery services and administration work currently seems to be one of the safest bets going in the UK market.
KPMG's UK restructuring arm has acted as administrator to high-profile casualties of the coronavirus pandemic, including Intu Properties, the shopping centre-owner, and Arcadia Group's flagship TopShop store in London's West End.
In view of its success in its current form, three of KPMG's top restructuring partners in the UK – Blair Nimmo, Will Wright and Mark Raddan – are being lined up to hold senior management roles once the deal completes. John Connolly, a former chairman of Deloitte, is meanwhile understood to be in talks with HIG about becoming Chairman of a new standalone business.
The carve-out will represent the most valuable restructuing disposal to date by one of Britain's Big Four professional services firms. 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.
As a result, a similar deal is presently manifesting at KPMG rival firm Deloitte. There, private equity firm Teneo is reportedly poised to clinch the purchase of Deloitte’s restructuring practice for a deal worth “hundreds of millions.”
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.
