KPMG, the “big four” accountancy firm, has rejected overtures from private equity investors interested in buying its UK restructuring business amid intense scrutiny of the audit profession’s efforts to navigate conflicts of interest.
Sky News has learnt that KPMG’s UK leadership has been sounded out in recent months by buyout firms about a takeover of the restructuring unit, which advises clients on debt and equity-raising activity during periods of financial distress.
It also supervises insolvency processes such as the Company Voluntary Arrangements carried out this year by the burger chain Byron, and administrations in cases such as Monarch Airlines, which collapsed last year.
Informal approaches are thought to have come from firms including Permira, which last year paid $1.7bn to take control of Duff & Phelps, the professional services outfit which acted as the administrator to BHS, the high street retailer.
The interest was rebuffed by KPMG on the basis that Bill Michael, the firm’s UK chairman, is keen to avoid selling any of its significant fee-earning operations, according to insiders.
The London audit market has been rife with speculation since the summer that KPMG was drawing up plans to sell its UK restructuring business or even its wider deals advisory division, which is said to have attracted the interest of Hellman & Friedman, a former owner of AlixPartners.
Sources said that KPMG had conducted a review of the restructuring operation, including examining the impact of a sale on the firm’s remaining transaction-related business, and had decided not to pursue an auction.
One insider said that a bid for KPMG’s deal advisory arm would in any event need to value it at “many hundreds of millions of pounds” to be successful, given that FTI Consulting, a US-listed professional services group, trades at a premium valuation.
Although Mr Michael and his senior colleagues have opted not to pursue a sale of the restructuring division or wider deal advisory business, the approaches for it underline the extent to which the largest accountancy firms are wrestling with the future of some of their non-audit activities.
KPMG has been hit by a string of multi-million fines from the audit regulator in relation to work carried out on companies such as Ted Baker and Quindell, although the biggest penalty was imposed this year on PricewaterhouseCoopers (PwC) for its sub-standard auditing of BHS.
The quartet of “big four” practitioners – Deloitte, EY, KPMG and PwC – have been on alert for months for a regulatory crackdown following public anger about the auditing of companies such as BHS and Carillion, the construction giant which collapsed in January.
Earlier this year, Business Secretary Greg Clark, asked former Treasury mandarin Sir John Kingman to conduct a review of the Financial Reporting Council, the industry regulator.
In recent days, however, the government has gone further, asking Lord Tyrie, who chairs the competition regulator, to examine the audit market.
KPMG declined to comment on Wednesday.