KPMG has sold its UK restructuring business to investment firm H.I.G Capital with partners and staff set to join the firm
H.I.G. Capital, LLC, a global alternative investment firm with over €35 billion of equity capital under management, has announce that one of its affiliates has signed a definitive agreement to acquire KPMG’s UK restructuring business, a leading provider of insolvency, financial restructuring and turnaround services in the UK and globally.
Terms of the transaction, which is expected to complete in April 2021, were not disclosed.
Following completion of the transaction, the business will rebrand as Interpath Advisory, becoming the largest independent restructuring and turnaround team in the UK. The new business will be led by Blair Nimmo, Will Wright and Mark Raddan, who have also led the transaction as three of the senior partners in KPMG’s UK restructuring practice. They will be supported by an experienced group of partners who will remain as significant shareholders in the business.
KPMG UK Restructuring is a multidisciplinary practice of approximately 22 partners and 528 staff located across the UK. The group advises companies, lenders, equity holders and a wide range of other stakeholders including government, regulators and pension trustees to navigate through the issues associated with economic disruption and overcome financial and operational challenges.
All staff and partners currently employed in KPMG’s UK Restructuring practice will be transferred to the new business on completion of the sale. The sale will see 22 partners and circa 528 staff transfer to Interpath Advisory, making it the largest independent restructuring and turnaround business in the UK.
KPMG’s decision to sell the business was driven by the significant changes in the insolvency and restructuring market in the UK over recent years. The increasing number and unique complexity of multiple stakeholders in distressed and stressed situations has made the navigation of conflicts of interest ever more complex for Big Four firms like KPMG, which have audit or non-audit relationships with almost every large and medium-sized business across the UK. With this situation only anticipated to intensify in the future, and with such developments likely limiting the growth of the firm’s restructuring business, the decision to commence a sale process was taken last autumn.
Mary O’Connor, interim chief executive of KPMG UK, said: ‘This is a significant transaction for KPMG. As businesses across the UK pivot to new ways of working; the pace of digital transformation quickens and we focus on the transformation of our own business, this agreement will allow us to accelerate investment in our core services, enabling us to take advantage of the significant market opportunities that lie ahead. At the same time, it will allow the team at Interpath to serve a broader client base, explore new market opportunities and fully realise their potential.’
On completion of the deal, KPMG UK will continue to provide all other advisory services, including debt advisory.
H.I.G.’s investment will support Interpath Advisory in its transition to an independent business and strengthen its existing capabilities as it continues to grow its advisory offering in the UK and beyond. H.I.G. has a successful international track record of investing in and supporting the long-term growth of consulting and professional services businesses across Europe and the US.
Blair Nimmo, KPMG partner, said: ‘This is tremendously exciting news for our business and our people and opens up enormous potential for growth. With over 500 people based across the full breadth of the UK, Interpath Advisory will become the largest independent restructuring and turnaround business in the country.
‘From the strong foundations that we’ve built over the past 50 years, we’re looking forward to building a market-leading international advisory business that is capable of servicing the largest and most complex engagements.’
Markus Noe-Nordberg, managing director and head of the H.I.G. European middle market LBO team, which led the transaction, said: ‘We are thrilled to welcome Interpath Advisory to the H.I.G. family. H.I.G. has had great success investing in leading professional services firms, and we will use this experience to help Interpath maximise its potential. This transaction is an ideal fit with our investment mandate and underscores once more H.I.G.’s ability to execute on complex transactions such as carve-outs.’
Nishant Nayyar, managing director at H.I.G. Europe, added: ‘We have been impressed by Interpath's track record, deep client relationships and above all its collaborative culture. Interpath will be ideally positioned to support its clients in their recovery from the disruptions caused by the Covid-19 pandemic. We are proud to partner with Blair, Mark, Will and the entire team and look forward to supporting Interpath's continued growth.’
KPMG’s sale of its restructuring business follows the UK regulator, the Financial Reporting Council’s, requirement for the UK’s largest audit firms to divest part of its business in order to protect audit independence and reduce opportunities for conflicts of interest following a number of major audit failures.
The move follows the sale of Deloitte’s restructuring business to Teneo, the global CEO advisory firm, last month.