Accounting giant KPMG is looking to merge dozens of national partnerships in an overhaul of its global structure, reported Financial Times, citing sources.
This move aims to enhance growth and prevent audit scandals, as the accounting firm seeks to integrate its businesses more closely.
The firm plans to reduce the number of “economic units” from more than 100 to as few as 32 by next year.
KPMG’s initiative is part of a “clustering” strategy that began in 2023, which has already led to mergers in the Middle East and Africa.
In 2024 KPMG’s UK partnership voted to merge with its Swiss business, furthering this consolidation effort.
Historically, Big Four firms have operated as networks of locally owned partnerships, adhering to local audit regulations.
However, the model is under strain as consulting, which requires technology investment, becomes more vital.
Smaller countries may struggle to keep up with these investments and necessary compliance procedures.
KPMG reported global revenues of $38.4bn in its last financial year, with a growth rate of 5.4%, the fastest among the Big Four.
However, this growth has slowed compared to the previous year, amidst economic and geopolitical uncertainties affecting clients.
KPMG International CEO Bill Thomas received a one-year extension to his leadership term to oversee the firm’s strategy through to September 2026.
Executives have set a $300m revenue threshold, below which a member firm might not remain a full member of the KPMG network in the long-term.
KPMG also aims for profit-sharing across countries involved in mergers, moving towards full profit-sharing over time.
Previous merger attempts, such as KPMG Europe in 2007, faced challenges and were reversed due to inefficiencies.
Other Big Four firms have encountered similar structural challenges.
EY’s plan to merge and float its national consulting operations collapsed in 2023 due to internal conflicts.
Deloitte successfully combined clusters of member firms in north-west Europe in 2016 and Asia-Pacific in 2018.
KPMG will maintain country-level legal entities to comply with local audit regulations, but reducing economic units is expected to facilitate necessary growth investments.
KPMG International chief operating officer Gary Wingrove said: “The fewer business units you have, the easier it is to do business globally. 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.
“It also provides our people with better career prospects, as it is easier to move within a unit than between them.”
