ICG and Towerbrook are among the prospective bidders for the big four auditor’s restructuring business, Sky News learns.
A heavyweight pack of private equity firms is circling the big four auditor KPMG as it prepares to offload its restructuring operations in the UK.
Sky News has learnt that Intermediate Capital Group (ICG) and Towerbrook Capital Partners are preparing to lodge initial bids for the business ahead of a deadline later this month.
City sources said that offers could value the KPMG UK restructuring division – which advises companies on safeguarding their balance sheets during periods of financial distress – at more than £400m.
The accountancy firm has kicked off a sale as the reform agenda dominating the audit profession enters what is likely to be a critical year.
Permira, which holds a stake in Duff & Phelps, the professional services firm, had an approach for KPMG’s UK restructuring arm in 2018, but may have revived its interest during the current sale process, according to sources.
Duff & Phelps itself has separately been named by market sources as a potential bidder.
Last autumn, KPMG became the second member of the big four – after Deloitte – to signal plans to sell its restructuring wing amid growing pressure on auditors over their management of conflicts of interest.
The big four have submitted plans to the Financial Reporting Council (FRC) demonstrating how they intend to ‘operationally separate’ their audit and consulting arms during the next four years.
That push has come in the wake of accounting scandals at companies such as BHS and Carillion, which collapsed with the loss of tens of thousands of jobs.
KPMG was Carillion’s auditor prior to its demise, and is likely to face a hefty regulatory fine in the coming months as the Financial Reporting Council concludes its investigation.
More stringent restrictions imposed by regulators mean restructuring teams in audit firms are now far more limited in the roles they can assume on corporate restructurings if the company has been audited by them in recent years.
Under plans shared with prospective bidders, three of KPMG’s top restructuring partners in the UK – Blair Nimmo, Will Wright and Mark Raddan – would hold senior management roles following a deal.
The firm’s restructuring arm has handled a number of prominent insolvency processes during the COVID-19 crisis, including the administration of Intu Properties, the shopping centre-owner.
Nevertheless, KPMG has warned its UK partners to prepare for reduced payouts, saying that they “will and should feel a greater impact” – while also warning that the wider workforce should expect to receive “significantly reduced…or no bonuses this year”.
During the summer, KPMG abandoned proposals to slash the sums it pays into thousands of employees’ pension pots following the threat of legal action.
Bill Michael, KPMG’s UK chairman, has described the pandemic as “an economic disaster”.
KPMG has also sold its pensions advisory business to a buyout backed by Exponent Private Equity.
ICG, Permira, Towerbrook and KPMG all declined to comment.
