KPMG India, KPMG US, and KPMG UK are exploring a merger of their advisory practices, a move aimed at multiplying their consulting business in India, said multiple people with knowledge of the matter.
The industry-first exercise will combine the consulting, risk, tech consulting, and deal advisory practices of the three regions of the consulting giant into KPMG India, the people said.
The combined entity will invest aggressively in scaling up the India advisory practice and growing client servicing capabilities in India.
The tax and audit practice, through affiliate BSR & Co, will be excluded from the merged entity and could be made into a separate entity, though that is still under discussion, the people said requesting anonymity. The 'Project Himalaya', as it is being called inside KPMG, has been underway for a few months and is being driven by KPMG India CEO Yezdi Nagporewalla, along with a few select partners. The new entity, when formed, is expected to soon grow to 50,000 people, with combined revenue of more than $1 billion just from the India platforms, the people said.
KPMG India has about 20,000 people in India and another 20,000 in KGS, its global capability centres.
The nitty-gritty details are being worked out, and people in the know say that KPMG India will work under the same structure in the near future. KPMG India has been growing at more than 30% over the last two years, boosted by robust growth from its technology consulting and risk service lines, though other service lines like tax and audit are also recording more than 20% growth.
"The India practice is among the top 2-3 highest-growth businesses within the entire KPMG universe. Plus, our talent base and service capability are admired across the firm globally. That was a key factor in driving this deal," said a KPMG partner who was present at the meeting. The Indian entity clocked total revenues of ₹5,500-₹5,600 crore in FY23 with advisory services contributing nearly 60%.
Experts say that the merger will help the India firm compete on an even footing with EY, Deloitte, and PwC, which have bigger advisory practices. This would also allow KPMG UK and US advisory practices to get better service levels at lower costs due to scaled-up capability centres.
"It's a game-changing move in terms of delivery capability. If the deal happens, it will bring the Indian firm right up there with other well-funded competitors in advisory services. Competition will only get tougher as KPMG will be able to get access to global resources seamlessly," said another KPMG partner on condition of anonymity.
All the Big Four firms have been looking at ways to resolve the consulting conundrum after conflicts of interest emerged as a major issue for financial regulators globally.
EY recently attempted to globally split its consulting and audit practices into separate companies, but 'Project Everest', as it was formally known, collapsed dramatically due to partner misalignment.
If this deal materialises, KPMG India will be able to attract more high-quality talent, ensure better delivery of services, and pay its partners top dollars in a market where experienced talent demand is far outstripping supply.
The Big Four (EY, PwC, Deloitte, and KPMG) reported record revenues of over ₹32,700 crore in FY23, with advisory services dominating. While tax and audit services maintain stable client bases, advisory revenues have shown remarkable post-Covid growth, prompting all the four firms, including KPMG, to explore diverse strategies for expanding their advisory services.
In the last three years, tech consulting has turned out to be the unlikely battleground for the Big Four firms, with the combined number of full-time tech consultants in their India practice crossing 40,000, making it the largest and fastest-growing cohort of professionals amongst all service lines.
Sourced from Economic Times India