KPMG in Cyprus comments on international consolidation strategy - sees beneficial integration opportunities

KPMG in Cyprus has responded to international news reports revealing that KPMG is aiming to reduce 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.

The proposed cuts were revealed in a presentation executives made to analysts last month and that was then described to the British news outlet, the Financial Times.

Responding to the report, KPMG in Cyprus has released the following statement, “As part of our Collective Strategy, we see opportunities for greater integration of some of our member firms over time. Greater integration of our businesses brings a number of benefits to our clients, people and the capital markets all around the world including our country. Importantly, it underpins our commitment to greater consistency and quality. KPMG in Cyprus remains committed to contributing even further to the Global Collective Strategy.”

As reported by the Financial Times, 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."

With people familiar with the matter as the news outlet’s sources, the Financial Times said, “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.”

According to the same report, 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.

As mentioned above, this was “according to a presentation executives made to analysts last month that was described to the Financial Times.”

According to the report, 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.

“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,” the Financial Times said.

It also noted that 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 report also said, 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 prevent reputational scandals.

The Financial Times, meanwhile, also pointed out that 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,” it said, going on to note that 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.

KPMG has, according to the Financial Times, 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, according to the report. “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.”