KPMG to merge dozens of partnerships in overhaul of global structure
Stephen Folley Ellsheva Kissin Mar 11, 2025
New York/London | 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.
The effort to more closely integrate the businesses, which are separately owned by the partners in each country, amounts to one of the biggest overhauls of a big four network in years and comes at a time of sluggish growth and uncertainty for the industry.
KPMG CEO Bill Thomas was given a one-year extension to his leadership term to see through a strategy of investment and integration that runs to September 2026. Bloomberg
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.
The target represents an acceleration of a “clustering” strategy that the firm has been pursuing since 2023, which has already led to the combination of several member firms in the Middle East, and a similar initiative in Africa.
The Australian firm has also been asked to examine the proposal, a spokeswoman said.
“As part of our global firm strategy, we see opportunities for greater integration of some of our member firms over time,” she said. “Greater integration of our businesses brings a number of benefits to our clients, people and the capital markets. Importantly, it underpins our commitment to greater consistency and quality. It’s still early days, and we are taking the time we need to discuss and consider this.”
In a further consolidation, KPMG’s UK partnership voted last year to merge with the KPMG business in Switzerland.
Unlike multinational corporations, the big four accounting firms have historically been made up of a network of locally owned partnerships, reflecting local audit regulations and protecting partners in one country from liability for scandals elsewhere.
But the model has become increasingly strained as consulting, which requires substantial investment in technology, becomes a more important part of the business.
According to people familiar with the matter, the company is concerned that smaller countries may struggle to keep up with these investments while also funding the compliance procedures necessary to protect audit quality and preventreputational scandals.
KPMG had global revenues of $US38.4 billion in its last financial year. At 5.4 per cent, stripping out currency fluctuations, this was the fastest growth among the big four but represented a slowdown from the previous year.
The outlook for the industry in 2025 has been clouded by economic and geopolitical uncertainty affecting clients.
Bill Thomas, chief executive of KPMG International, was given a one-year extension to his leadership term to see through a strategy of investment and integration that runs to September 2026.
Executives have set a $US300 million ($477.8 million) revenue threshold below which a member firm might be too small to remain a full member of the KPMG network in the long term, one of the people said.
KPMG is also insisting that, in any mergers, the profit pools for partners be at least partially shared across the countries involved, with the aim of moving to full profit-sharing over time, the person said.
Previous merger attempts within KPMG have proven fraught. In 2007, the company’s UK, German, Swiss and Liechtenstein businesses merged to form KPMG Europe, but the move was reversed after it failed to deliver the intended efficiencies.
Other big four firms have faced similar challenges adapting their structure to meet the need for technology investment and more efficient service for international clients.
A plan by EY to merge its national consulting operations and float them on the sharemarket collapsed in 2023 amid bitter infighting.
Deloitte has successfully combined clusters of member firms, including in north-west Europe in 2016 and Asia-Pacific in 2018.
KPMG said it would retain country-level legal entities to comply with local audit regulations but that reducing the number of economic units would facilitate the investments needed for its growth strategy.
“The fewer business units you have, the easier it is to do business globally,” said Gary Wingrove, chief operating officer of KPMG International and the former head of KPMG Australia.
“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.
“It also provides our people with better career prospects, as it is easier to move within a unit than between them.”
With The Australian Financial Review
