An injection of private equity cash into the restructuring market via new spin-offs from Deloitte and KPMG has stoked frantic hiring in the space, despite an expected pandemic-driven restructuring boom not materialising.
The restructuring businesses of KPMG and Deloitte both broke away from their respective firms earlier this year. KPMG’s team has set up as Interpath after a buyout backed by private equity firm HIG, while Deloitte’s business was bought by CVC Capital-backed advisory business Teneo.
Both firms are actively trying to grow the strength of their benches, according to insiders, recruiters and people familiar with the market, as they enter competition with US restructuring businesses such as Alvarez & Marsal, Alix Partners and FTI Consulting, which have all spent heavily on growing their European businesses in recent years.
“There is massive demand,” said Guy Barnes, head of professional services at recruiter Acertitude. There simply aren’t enough really good people. Unlike other forms of consulting you can’t just take a consultant and point them in the right direction, they need to make big decisions and that requires experience.”
“It is the most robust talent market for people of my sort of experience I have ever seen,” a senior restructuring partner said. Most people with a reasonable amount of experience are getting two or three recruiter calls every week.”
The frenetic hiring comes despite a flat market for restructuring work and an ill-timed scandal at the Deloitte restructuring team’s new home, Teneo.
The public relations and advisory firm has been rocked by the resignation of its founder and chief executive Declan Kelly late last month after reports surfaced of drunken misbehaviour at a charity event in early May.
However, one member of the Teneo restructuring unit said its ambitious growth plans had not been dented by the incident.
The person pointed to the speedy replacement of Kelly by chief operating officer Paul Keary, and said that as former Big Four partners the team were no strangers to corporate scandals so were able to take this one in their stride.
Senior executives at both Interpath and Teneo said part of their motivation for breaking away from their Big Four parents was to be better able to compete with their US rivals in the hiring market.
“It was very hard in the last few years to attract anybody into the Big Four because of conflicts,” Blair Nimmo, chief executive of Interpath, said.
“We looked at the 50 biggest insolvencies in the UK over the last three years and we were conflicted from 43% of them…The Big Four has been under constant attack,” Nimmo added, referring to the leak of partners and directors to the boutiques over the last five years.
“We spent a period of time as Deloitte partners where candidly it was quite difficult to recruit, particularly at a senior level, because of conflicts and compensation,” the Teneo executive said.
“It was an easy choice for people historically to leave and join those firms,” they added.
The US boutiques typically used a more individualistic pay structure than the Big Four, and can also have lower overheads so have been able to lure talent away with the promise of higher pay and fewer conflicts.
Alvarez has continued to target the Big Four for hires, with non-performing loans specialists David Edmonds, Deloitte’s head of financial services and vice chair until May, and Andrew Orr, joining the team, according to two people familiar with the matter. The firm declined to comment.
Their hires follow those of restructuring partners Michael Magnay, Christian Ebner and James Dervin and alternative capital head Floris Hovingh, who all quit Deloitte last year to join the US outfit
The talent war in the space is taking place against the backdrop of a flat market, with government support and cheap debt helping companies stay afloat.
There have been a handful of juicy restructuring mandates in the market, however, with EY called up by Credit Suisse to advise on the collapse of Greensill Capital and Alvarez acting for the Gupta Family Group on its restructuring and acting as the administrator for NMC Health.
“There is lots of speculative investment in very expensive assets and an overheated market and yet the world hasn’t gone pop,” Acertitude’s Barnes said.
“It creates a little bit of a risk for them hiring at this point in time where you don’t have visibility on when the market will pick up,” another restructuring professional said of Teneo and Interpath.
Corporate insolvencies increased 63% in June compared to the previous month, but were still down 18% on the comparable month pre-pandemic, according to data from the Insolvency Service.
Restructuring advisers who spoke to Financial News predicted an upswing in work in the final quarter of this year or the first quarter of 2022 as government support falls away and emergency funding needs to be repaid.
The restructuring teams at Teneo and Interpath — and their private equity backers — will be hoping that those predictions are correct.
To contact the author of this story with feedback or news, email James Booth