Deloitte has reached an agreement to sell its UK pensions advisory business to Isio, the private equity-backed firm that was spun off from KPMG in 2020.
The proposed divestiture is the latest in a series of deals by the Big Four accounting firms, which also include EY, KPMG and PwC, seeking to raise funds for investments in areas such as technology and sustainability consulting, while generating record profits for partners.
Acquiring Deloitte’s 200-person pensions division, called Deloitte Total Reward and Benefits, would grow Isio into a 1,000-person company. The unit has annual sales of around £25m and would bring Isio’s annual revenue to around £140m, said Andrew Coles, Isio’s chief executive.
The transaction is expected to close in the spring, subject to Financial Conduct Authority approval. The terms of the sale were not disclosed.
The deal follows Deloitte’s £220m sale of its UK restructuring and bankruptcy practice to US professional services group Teneo in 2021.
Partners in some of the Big Four’s consulting practices are frustrated with conflict of interest rules preventing them from winning engagements from audit clients, prompting some to consider expanding their practices faster by becoming independent.
Conflict rules could be particularly sensitive for parts of the business, including pensions advice, which provide services to clients under multi-year contracts, a senior industry leader said.
Deloitte has so far dismissed the idea of following rival EY in pursuing a more radical split of its audit and advisory activities on a global basis, and said on Wednesday it had no further divestments in the UK.
“This is not part of Deloitte’s broader divestment strategy,” said Lisa Stott, UK managing partner for tax and legal at Deloitte, adding that divestitures “are not our business model”.
Deloitte has no concrete investment plan for the windfall it would receive from the sale, Stott said, adding that the fixed income business is a “very small” part of its UK operations, which its latest financial report reported revenues of 4.9 billion a year. Deloitte would retain a small number of fixed income specialists to support its audit business, she added.
The pension sale would be Deloitte’s first since it confirmed in November that Richard Houston would serve a second four-year term as UK chief executive. Houston has record earnings per affiliate of more than $1 million
In November, he thwarted the company’s 16-strong UK leadership team by removing half of them from leadership, although all but one will remain with the company as partners.
The deal with Deloitte is Isio’s second significant acquisition since gaining independence from KPMG in a transaction backed by private equity firm Exponent. The company provides actuarial advice, pension administration and investment services for employers and pension schemes.
It was expanded to include employee benefits and wealth management advice through the purchase of Premier Pensions Management in January 2022.
Isio, which competes with larger pension advisors including Aon, Mercer and Willis Towers Watson, reported a pre-tax loss of 5.5 million reported accounts.
https://www.ft.com/content/6e75c9fe-d611-4461-9a21-74b29b3f0ab8 Deloitte agrees to sell UK fixed income business to Isio