KPMG UK is eyeing a strategic merger with KMPG Switzerland; replicating Deloitte's decision in 2006 to merge with its Swiss counterpart, which now operates a single partnership across two countries. This potential deal signals a bold move for KPMG in driving the future profitability of the company.
KPMG, whilst being the smallest accountancy firm out of the Big Four, is also the most European-focused firm. In the UK they employ about 17,000 people and recorded a revenue of £2.7bn for the year leading up to September 2022. In Switzerland, it has 2,600 employees and reported a revenue of £480m.
Partners in the UK and Switzerland were informed about this plan on the 1st of December but will be further consulted on the details of the merger in the coming months. If the partnership is on board, the firm will likely bring a proposal for an equity partner vote next year.
The motivation underpinning this move, as stated by CEO Jon Holt, emphasizes the long-term vision of building a resilient and sustainable business. The merger aims to capitalize on collective power, fostering increased collaboration, client service and global career opportunities.
This significant strategic move by the accounting giant comes after facing several recent challenges, including the frantic resignation of the former chairman Bill Michael. This paired with weakened demand for their services due to the difficult economic environment has led to planned job cuts in October, and the freezing of pay of around 12,000 employees in the UK just weeks after partners of the firm earned on average £717,000.
However, the company faces arguably a far more significant challenge than these, which is its structural weaknesses. A critical concern lies in its fragmented structure of locally owned partnerships, which distinguishes it from its more integrated Big Four counterparts. KPMG's decentralized model has led to "increased costs and infighting over the allocation of profits on international projects", making it more difficult to compete for the more “lucrative cross-border consulting work”. Thus, the potential merger between KPMG's UK and Swiss branches could combat this weakness, as it underscores the need for strategic adjustments to bolster its global competitiveness.
KPMG’s proposed merger with its Swiss counterpart emerges as a strategic response to a plethora of challenges which it faces. Beyond the leadership transitions, economic pressures, and structural weaknesses, this move underscores a commitment to transformative growth. The extent to which, CEO Jon Holt's vision for a more resilient and sustainable business demonstrates collective collaboration, client service, and global career opportunities lies in whether this strategic alliance will not only address past setbacks but also position KPMG as a dynamic force ready to redefine its role within the competitive terrain of the Big Four. The outcome will undoubtedly shape the narrative of KPMG's trajectory and influence the future landscape of the global financial industry.
Comments