KPMG thinks it’ll save money, open up new opportunities, and be better equipped to make widespread technology investments by consolidating local firms in its international network.
In May of 2024, KPMG announced that KPMGs UK and Switzerland would merge to form a $4.4 billion MechaKPMG. Said KPMG UK chief executive Jon Holt at the time, “This marks a historic moment for both firms. We will be stronger as one combined firm and together we will have the scale to significantly enhance our ability to deliver great outcomes for our clients both internationally and within our domestic markets. Merging brings huge benefits for our clients, our people, and our partnership and means we can now grow faster, be more profitable and invest together to create new services in a sustainable way.”
Then in August, KPMG Saudi Levant and KPMG Lower Gulf announced they too were merging. This seemed like unremarkable news on its own but as we noted at the time, the firm said this in the press release announcing the union: “The proposed integration is consistent with KPMG’s Global Collective Strategy, which includes the clustering of member firms across the network.” Between that and the UK/Switzerland merger, it seemed clear KPMG was cooking something up.
So it shouldn’t be too surprising that Financial Times reported this today:
KPMG bosses are demanding dozens of mergers among the national partnerships that make up the global accounting firm in a move they hope will boost growth and prevent audit scandals, according to people familiar with the matter.
KPMG is aiming to slash the number of “economic units” that make up the international network to as few as 32 by next year, from more than 100 two years ago, according to a presentation executives made to analysts last month that was described to the Financial Times.
“Demanding” is an awfully strong word, isn’t it? We know FT doesn’t use charged language lightly (unlike certain hyperbolic accounting tabloids that shall not be named because their name is in big green letters at the top of this page).
“The company is concerned that smaller countries may struggle to keep up with [necessary technology] investments while also funding the compliance procedures necessary to protect audit quality and prevent reputational scandals,” said FT.
Right now, KPMG and their Big 3 competitors operate global networks that consist of local, independent member firms, each mostly responsible for their own stuff. What KPMG is working on would combine some of these local member firms, eventually leading to full profit sharing among them (according to FT).
KPMG International’s chief operating officer Gary Wingrove told FT that it’s easier to do business globally when you have fewer business units. “We want better scale in our member firms. It deals with factors related to resilience and quality [which] protects the fabric of the organisation, and bigger units can invest more so as to deliver the right services to clients across the globe,” he said. Makes you wonder which member firms are making the brand look bad, doesn’t it?
Pay attention to the next part of his quote. “It also provides our people with better career prospects, as it is easier to move within a unit than between them.” This is similar to what KPMG UK CEO Jon Holt said when his firm’s merger with KPMG Switzerland was announced: “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.”
Suddenly we’re remembering a situation in 2023 when India’s Economic Times ran a story about KPMG US, UK, and India possibly merging their consulting, risk, tech consulting, and deal advisory practices together. A KPMG spokesperson told us at the time that the dubious rumor was poppycock: “KPMG is a network of member firms, which are independent of each other. We are, as always, focused on opportunities for greater collaboration within our existing India-based client delivery network,” the spokesperson said.
Hmm.
Nothing’s finalized yet, this too could be poppycock. Or KPMG’s version of Project Everest. Stay tuned.
