Deloitte has put their restructuring business in the UK up for sale. This comes after the big 4 are being forced to split up their audit and consulting businesses. The big 4 have said that it is becoming too hard to manage their conflicts of interest.
This new regulation came about after the big 4 accounting firms had too many accounting scandals in the UK. They have to isolate their audit businesses by 2024 according to new regulations by the FRC.
KPMG already sold their pension advisory business in March 2020 for 200 million pounds.
Deloitte is hoping to get hundreds of millions of dollars for their restructuring business. Restructuring is a business where the big 4 help companies that are struggling go through bankruptcy or restructure their operations. Oftentimes this means closing offices and laying people off so this business is a good business to be in right now. They know this and are hoping to get a good price while it is at its peak price.
Deloitte’s UK restructuring business has 350 employees and 20 partners.
Big 3 Audit Firms Australia
People think this restructuring sale is about avoid conflicts of interest which I don’t disagree with. However, there is plenty of time to sell the unit. The reason Deloitte is purusing this right now is because they can get the most money right now. There probably isn’t that many conflicts of interest in restructuring because Deloitte probably doesn’t audit that many companies that are going out of business.
Let’s cover another story about Australia. There is a news story that recently came out about how there really only 3 big auditing firms in Australia.
The australia financial review recently covered a story about how there are only 3 auditing firms left in Australia. Those 3 firms are KPMG, EY and PwC. PwC had 40.5 percent market share on audit fees, EY had 27% and KPMG had 25 percent. This leaves about 6.5 percent for Deloitte.
PwC – 40.5%
EY – 27%
Deloitte – 6.5%
The article goes on to discuss how the “big 3” fail to perform high quality audits. Would you perform a high quality audit if you didn’t have competition?
The Australian Financial Review made it seem like this was a mistake that Deloitte is losing ground. However, it isn’t a mistake. Deloitte doesn’t care about audits around the world. They are more interested in consulting. This makes them vulnerable during downtimes in the economy, but it makes them very powerful when the economy is doing well.
What the news site forgot to look into was revenues. PwC might make the most revenue in Australia, but it isn’t by much. They only make 2.6 billion versus Deloitte’s 2.5 billion. Now it all makes sense right? Deloitte avoids conflicts of interest with their audit firm and just goes after as much consulting revenue as they can.