KPMG to merge dozens of markets in major overhaul
Big Four audit giant KPMG will merge dozens of its national partnerships in an attempt to accelerate growth and minimise audit scandals.
The move to integrate its panoply of businesses, each of which is owned by the respective partners in each jurisdiction, represents one of the most significant shake-ups at a major professional services network in years.
It will occur in what has been one of the most challenging operating environments for Big Four firms in recent history as they battle to retain their predominance in financial and management consultancy.
KPMG – the smallest of the Big Four cohort that also comprises Deloitte, PwC and EY – will shrink the number of so-called ‘economic units’ that make up its international footprint to just 32, having stood at more than 100 just two years ago.
The move, first reported by The Financial Times, represents a new high water mark in the ‘clustering’ drive that the partnership has been pursuing for the last two years.
The effort has seen a merger between several national partnerships in the Middle East, while the UK partnership voted to join forces with its Swiss counterpart last year.
A spokesman for KPMG International said: “As part of our collective strategy, we see opportunities for greater integration of some of our member firms over time.
“Greater integration of our businesses brings a number of benefits to our clients, people and the capital markets . Importantly, it underpins our commitment to greater consistency and quality.”
In order to conform to the multitude of local audit regulations – to protect partners in one country from liabilities that occur elsewhere – Big Four firms have traditionally comprised a network of partnerships that are each owned and run locally.
But that model has come under strain as the management consultancy divisions of the four professional services juggernauts have made up an increasing share of revenues. The consultancy arms are not beholden to such strict regulatory frameworks and also tend to be more capital-intensive, making consolidation and efficiency hunting tempting.
According to sources quoted by The Financial Times, KPMG top brass are concerned that partnerships in smaller markets may struggle to keep up with the required level of investment into sector-defining technologies like artificial intelligence.
As a result, executives have earmarked $300m (£232m) as the revenue threshold below which economic units will likely be encouraged to merge.
“The fewer business units you have, the easier it is to do business globally,” Gary Wingrove, chief operating officer of KPMG International, told The Financial Times.