Deloitte has struck a deal to sell its UK pensions advisory division to Isio, the private equity-backed business spun out of KPMG in 2020.
The planned disposal is the latest in a string of transactions by the Big Four accounting firms, which also include EY, KPMG and PwC, as they attempt to raise funds for investment in areas such as technology and sustainability consulting while maintaining record profits for partners.
The acquisition of Deloitte’s 200-person pensions unit, called Deloitte Total Reward and Benefits, would expand Isio to a 1,000-person business. The unit has annual revenues of about £25mn and would take Isio’s annual revenues to about £140mn, said Isio chief executive Andrew Coles.
The deal is expected to complete in the spring subject to approval by the Financial Conduct Authority. The terms of the sale were not disclosed.
The deal follows Deloitte’s £220mn sale of its UK restructuring and insolvency practice to US professional services group Teneo in 2021.
Partners in some of the Big Four’s advisory practices have grown frustrated by conflict of interest rules that prevent them winning work from audit clients, leading some to explore whether they could grow their practices more quickly by becoming independent.
Conflict rules could be particularly thorny for parts of the business, including pensions advisory, that offered services to clients under multiyear contracts, said a senior industry executive.
Deloitte has so far rejected the idea of following rival EY by pursuing a more radical break-up of its audit and consulting operations on a global basis, and it said on Wednesday that it was not planning further disposals in the UK.
“This is not part of a wider divestment strategy for Deloitte,” said Lisa Stott, UK managing partner for tax and legal at the firm, adding that disposals were “not our business model”.
Deloitte does not have a specific investment plan for the windfall it would receive from the sale, Stott said, adding that the pensions business was a “very small” part of its UK operations, which reported revenues of £4.9bn in its most recent financial year. Deloitte would retain a small number of pensions specialists to support its audit business, she added.
The pensions disposal 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 presided over record profits per partner of more than £1mn per year but has shown a willingness to shake up the organisation he has led since 2019.
In November, he took an axe to the firm’s 16-person UK executive team by removing half of them from the leadership, though all but one will remain as partners at the firm.
The Deloitte deal is the second significant acquisition by Isio since it became independent of KPMG in a transaction backed by private equity firm Exponent. The business provides actuarial advice, pensions administration and investment services to employers and pension schemes.
It expanded into advising on employee benefits and wealth management through the purchase of Premier Pensions Management in January 2022.
Isio competes with larger pensions advisory practices such as Aon, Mercer and Willis Towers Watson. It reported a pre-tax loss of £5.5mn on revenues of £75.4mn in the 12 months to September 2021, the latest period for which it has published accounts, due to the costs of establishing itself as a standalone business.