KPMG has put its UK restructuring practice up for sale and held talks with private equity firms ahead of a possible auction before the end of the year, according to people familiar with the matter.

A cash injection would help the Big Four firm, with its finances having suffered during the pandemic. KPMG also faces a potentially large fine over its audit work for Carillion, the collapsed outsourcing group, as well as a £250m negligence lawsuit brought by the company’s administrators.

Two people close to the restructuring practice said KPMG had spoken to interested buyers in recent weeks. One person said the firm had hired Melanie Richards, formerly deputy chair of KPMG who retired in September, to lead a sale process.

KPMG said: “We can confirm we are exploring options for our restructuring business. However, we have made no decisions over any eventual outcomes at this stage and will not comment further at this time.”

A person with direct knowledge of the situation described several discussions between senior KPMG partners and private equity firms in recent weeks. The person said the firm was “speaking to different players ahead of an auction”.

A second person, who works at a private equity firm, said his firm was aware of a sale process.

A third person close to KPMG said the “decision to sell [restructuring] was taken weeks ago”.

However, KPMG added: “We have not spoken to PE houses or their advisers in relation to this matter.”*

Restructuring is a significant fee-earning operation at KPMG. The practice has recently advised on the insolvency of travel operator Thomas Cook and at Intu Properties. It has 22 partners and 475 staff.

The plans come two years after KPMG rejected interest from buyout firm Permira in acquiring its restructuring division. A number of the unit’s senior partners, including Mark Raddan, global head of turnround, and Blair Nimmo, UK head of restructuring, have been part of plans to move the division outside KPMG since the Permira approach, two people close to the matter said.

A sale would end conflicts of interest that have made it increasingly difficult for KPMG’s restructuring partners to take on new clients.

Rival firm Deloitte put its restructuring practice up for sale last month following concerns among its senior executives that it had become too difficult to manage conflicts of interest. However, the plans were swiftly vetoed by the firm’s global business, which said a sale could have an adverse impact on the rest of the group.

The Big Four accounting firms have come under growing pressure to manage conflicts of interest after a series of corporate failures and accounting scandals called into question the quality of their audits and the independence of their advice.

Last year the Financial Reporting Council, which supervises the audit profession, introduced a “radical” update to its ethical standards for audit firms. It tightened the rules on what services the industry could provide to listed companies and financial institutions in an effort to strengthen auditor independence.

Source: Financial Times