KPMG plans merger of UK and Swiss businesses

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KPMG is planning to merge its UK and Swiss businesses in a tie-up that executives hope can boost growth and profits at the smallest of accounting’s Big Four. 

Partners in KPMG’s operations in the two countries were told last Friday that the firms were in discussions over a possible combination, people familiar with the matter told the Financial Times. Rank-and-file employees were given a more limited briefing on Monday. 

The merger, which would be subject to partner votes in both countries, would be the biggest strategic shift at the Big Four accounting firm since UK chief executive Jon Holt took over in 2021 after the sudden resignation of his predecessor Bill Michael. 

Holt is seeking both to repair KPMG’s reputation, after a series of fines and scandals, and to boost profits, which have lagged behind those of rivals. 

In a statement to the FT, Holt said: “We have started conversations with our Swiss firm to explore how working more closely together would bring greater benefits to our clients, people and partners. 

“Bringing together our two firms would give us more collective power to invest, build new services for our clients and provide our people with significant global career opportunities. Together, we would grow faster, be more profitable and do so in a sustainable way.”  

Partners at both member firms will be consulted on the details of the merger, with focus groups set to be held in the coming months, said a person familiar with the plan. A vote on the proposed merger is expected to take place next year, the person added. 

KPMG Switzerland has 2,600 employees and 145 partners. The firm reported net revenues of SFr527mn (£480mn) in its latest financial year, which ended in September. 

In the UK, KPMG employs about 17,000 people and reported revenues of £2.7bn for the 12 months to September 2022, delivering partners an average cash payout of £717,000.

If completed, the deal would replicate a move by Deloitte’s UK business in 2006 when it merged with its Swiss member firm. Deloitte operates a single partnership across the two countries.

Like the other Big Four names, KPMG is structured as a network of locally owned partnerships, which share a brand and some technology but do not pool profits globally. KPMG is the most fragmented of them, with less integration between its nationally owned partnerships than at Deloitte, EY or PwC. 

Industry executives have said the more atomised structure increases costs and infighting over allocation of profits on international projects, making it more difficult to serve multinational clients efficiently, particularly on lucrative cross-border consulting work. 

KPMG is the smallest of the Big Four both in the UK and globally and some partners at the firm and its rivals have told the FT that it lacks the scale to compete effectively in parts of the consulting market. 

The firm’s UK partnership has also shrunk to its lowest level in more than two decades and now totals 467, less than half the size of PwC. 

KPMG UK has yet to publish results for its latest financial year but, as at its rivals, demand for some services has been hit by the difficult economic environment, forcing bosses to freeze pay for around 12,000 employees. 

A merger of the UK and Swiss operations would not necessarily mean that partners in the two countries would be paid equally as firms can include factors such as geography, service line and revenue generated in calculating partners’ individual share of profits.