KPMG looking to consolidate dozens of country practices around the world

Big Four professional services firm KPMG is preparing to merge dozens of its individual country practices across the globe, with potentially as few as 32 units to remain by the end of next year.

According to a report from the Financial Times, KPMG is already deep into the process of whittling down its global member count from more than 120 separate practices just two years ago to somewhere closer to between the 30 and 40-mark, with Australia and the Asia Pacific a ripe candidate for sweeping consolidation.

Such a move would follow in the path of rival Big Four firm Deloitte, which in 2018 aligned its Australian and New Zealand operations with more than a dozen countries in east, south and southeast Asia, at the time creating a newly-integrated entity with around 45,000 employees and revenues upwards of $6 billion.

KPMG has alluded to its ‘global collective strategy’ and project of ‘clustering member firms’ across its network in the recent past, which last year saw its UK and Swiss branches come together along with those in the Saudi Levant and Lower Gulf, the latter which included its practices in the UAE, Saudi Arabia, Lebanon, Jordan, Oman, and Iraq.

Regional mergers

In both of those instances, the local partnerships were reported to have voted ‘overwhelmingly’ in favour of merging with their neighbouring regional practices, with the Financial Times reporting that partners in scores of other countries are now ‘demanding’ the same, apparently in the hope of boosting growth and somehow preventing further international audit scandals.

“The fewer business units you have, the easier it is to do business globally,” commented former KPMG Australia CEO Gary Wingrove, who handed over to Andrew Yates in 2021 and now serves as chief operating officer of KPMG International. “We want better scale in our member firms. It deals with factors related to resilience and quality, which protects the fabric of the organisation.”

The FT report suggested that any KPMG country practice generating revenues below a $300 million threshold will be looked at for amalgamation, with concerns they’ll otherwise struggle to keep up in a new era of advanced tech and increasing regulatory compliance. Although KPMG’s Australian arm pulled in $2.2 billion over its past financial year, the business was down by almost 4 percent.

Globally though, KPMG was the fastest-growing of the Big Four last year, up by more than 5 percent in the face of difficult market conditions, but sits a long way back from its primary rivals in revenue terms, with Deloitte for example posting figures of $67.2 billion, almost double that of KPMG’s $38.4 billion. Ernst & Young, in third spot, now earns more than $50 billion per year.

In a response to the AFR, a KPMG Australia spokesperson said: “As part of our global firm 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. It’s still early days, and we are taking the time needed to discuss and consider this.”