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Consultants line up bid for £200m KPMG pensions arm

One of the UK’s largest independent financial consultancy firms is plotting a £200m takeover of the pensions advisory arm of KPMG, the accountancy giant.

Sky News has learnt that Lane Clark & Peacock (LCP) is one of a handful of bidders through to the second round of an auction of the KPMG unit.

Sources said that LCP, which is backed by the private equity firm Inflexion, was competing against a number of trade and financial bidders for the pensions advisory business.

LCP provides actuarial and investment advice to hundreds of clients, including roughly one-third of the FTSE-100, according to its website.

That would make the KPMG division, which has about £50bn under advice, a logical fit with LCP’s business, according to City insiders.


The big four auditor put its pensions advisory arm on the block in June following a number of unsolicited approaches.

Its plan to explore a sale was revealed at the time by Sky News.

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The decision by KPMG bosses to do so came amid reforms aimed at curbing the scale of the big four accountancy firms’ consulting work for audit clients.

Its pensions advisory operation employs about 20 partners and roughly 450 people overall.

City sources say that KPMG has put a price-tag of about £200m on the business.

The division advises both corporate clients and companies’ pension trustees, and has become one of the largest such operations in Britain.

People close to the situation said in June that the decision to examine a sale was “not directly” a consequence of KPMG UK chairman Bill Michael’s decision last year to ban the firm from taking on consulting work for companies whose books are audited by it.

Nevertheless, offloading the division would underline the complexities that the big four auditors – Deloitte, EY, KPMG and PwC – are seeking to navigate amid pressure from regulators to reform their profession.

If concluded, a sale of the KPMG pensions advisory arm would be among the largest corporate disposals undertaken by one of the UK’s major audit firms.

Firms including KPMG and its principal rivals have been hit by a growing list of regulatory fines in recent years, with a slew of further probes by the profession’s largely discredited regulator, the Financial Reporting Council, yet to be completed.

KPMG itself has been forced to pay millions of pounds in penalties for failings in audits of companies including the Co-operative Bank and Ted Baker.

The collapse of big employers including BHS and Carillion has also increased the intensity of the spotlight on the audit profession, prompting the business secretary, Greg Clark, to outline plans to scrap the FRC and replace it with a new body: the Audit, Regulatory and Governance Authority.

A KPMG UK spokesperson said in June: “Over the last few years, our UK pensions advisory business has grown significantly into a market-leading business in the sector, advising both corporate clients and pension trustees, and as such, we regularly receive unsolicited offers and expressions of interest for the practice.

“Like any other large firm, we routinely assess the strategic fit of each business in our portfolio and as a result of this can confirm that following recent expressions of interest from third parties, we are exploring options for this area of the business.

“However, we have made no firm decisions over any eventual outcomes at this stage, and will not comment further at this time.”

The structure of Britain’s audit profession has been the subject of several inquiries in the past year, with competition watchdogs recommending greater separation between audit and consulting businesses within the big four firms.

Sir Donald Brydon, the former London Stock Exchange Group chairman, is leading a government-commissioned review of the future of auditing, while MPs on the business select committee have called for a full break-up of the big four.

KPMG has been the fastest mover among the profession’s leading quartet, telling its 625 partners last November that it would phase out the vast majority of non-audit work for the 90 FTSE-350 companies where it serves as the auditor.

Mr Michael has spoken of the importance of substantial changes to restoring trust in the profession, and has announced the creation of a new executive committee for its audit business as one of the changes aimed at achieving that goal.

As the auditor to Carillion, KPMG has been facing intense scrutiny for its oversight of the construction giant, which went bust in January last year with debts of more than £5bn.

LCP could not be reached for comment on Monday.


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