Deloitte in talks with bidders for British restructuring division

LaToya Harding
·2 min read
The Deloitte offices stand in 2 New Square on October 2, 2018 in London, England.
One insider said that the firm had ordered a strategic review of the UK restructuring division, which then led to talks this week about a potential sale. Photo: Jack Taylor/Getty Images

Deloitte has started discussions with potential bidders to offload its UK restructuring operation, it has been reported.

Daniel Butters, who is in charge of the company’s British restructuring business, briefed staff this week that he had received the go-ahead to kick off talks with private equity buyers, Sky News said.

One insider told the broadcaster that the firm had ordered a strategic review of the UK restructuring division, which then led to talks this week about a potential sale.

The move comes amid expectations of a steep rise in activity caused by coronavirus-related insolvencies and as audit firms face regulatory and economic pressure.

Restructuring services, which win work from firms in financial distress or in formal insolvency processes, are thought to be particularly attractive as the economy deals with the devastation from the pandemic.

Last month accounting rival KPMG said it was also exploring a possible sale of its restructuring unit and closing Makinson Cowell, its investor advisory business, at the end of November.

As the pandemic continues to rip into the retail, leisure and hospitality industry, the Big Four audit firms, which also include PwC and EY, have been appointed to oversee a number of company voluntary arrangements (CVAs).

A CVA is a formal agreement between a business and its creditors which gives firms the chance of recovery.

It sets out how repayments of company debts should be made to creditors and can deliver a better outcome than an administration or liquidation. After 14 days creditors are asked to vote and at least 75pc must agree.

READ MORE: How CVAs are reshaping Britain's high streets

Deloitte was appointed to look over Pizza Express earlier this year, which drew up plans to close around 75 of its 470 UK restaurants.

The Financial Reporting Council (FRC) has stopped the Big Four from doing consulting work for audit clients to separate perceived conflicts of interest.

On Friday, the audit watchdog fined Deloitte £362,500 ($477,000) and reprimanded a former partner over failing to relate to the audit of a former client’s defined benefit pension.

The FRC said the accounting firm did not ensure that the work carried out by the Engagement Quality Control Review (EQCR) was properly documented.

It also added that the Big Four firm did not obtain sufficient audit evidence to substantiate the cash holding of the client’s pension scheme. The fine was discounted from £500,000 for admissions and/or early disposal.

The former client in case has not been named by the FRC or the identity of the former partner.

Yahoo Finance reached out to Deloitte, who declined to comment.

Watch: Deloitte weighs sale of restructuring arm as audit conflicts bite