The big four accountancy firm KPMG will on Wednesday announce the £400m sale of its UK restructuring arm, marking a further step in the profession’s preparation for tough new audit regulation.
Sky News has learnt that the new standalone company, which will comprise approximately 500 people, will be renamed Interpath Advisory.
Backed by HIG Europe, the private equity firm, it will immediately become the largest independent restructuring practice in the UK by number of employees.
The announcement will come just weeks after KPMG's rival, Deloitte, sold its UK restructuring business to Teneo, a global strategic advisory firm.
A source close to the KPMG talks said the deal was hours away from being signed, although a formal announcement could yet be delayed.
John Connolly, the former Deloitte chairman, is in talks to become Interpath's chairman.
The transaction will represent the most valuable disposal to date by one of Britain's big four auditors.
It will entail a transfer of ownership of a turnaround and restructuring business which has acted as administrator to high-profile casualties of the coronavirus pandemic, including the burger chain Byron, shopping centre-owner Intu Properties and Arcadia Group's flagship TopShop store in London's West End.
Three of KPMG's top restructuring partners in the UK - Blair Nimmo, Will Wright and Mark Raddan - are being lined up to hold senior management roles once the deal completes.
HIG's identity as the backer of the management buyout is notable because its US affiliate, HIG Capital, on Tuesday agreed to pay £25m to settle an anti-avoidance case brought by The Pensions Regulator over its acquisition of the bed manufacturer Silentnight in 2011.
The sale of Silentnight to HIG was itself handled by KPMG's restructuring arm.
In a separate action, KPMG has been accused by the Financial Reporting Council of being "hopelessly compromised" after allowing HIG to acquire the business without its £100m pension scheme.
A disciplinary tribunal is due to provide its ruling on the matter shortly.
The decisions by Deloitte and KPMG to sell their restructuring arms comes amid pressure on big four firms to eliminate conflicts of interest between their audit and consulting operations.
A white paper on audit reform is expected to be published by ministers in the coming weeks.
All of the big four have submitted plans to the Financial Reporting Council (FRC) demonstrating how they intend to "operationally separate" their audit and consulting arms during the next four years.
That push has come in the wake of accounting scandals at companies such as BHS and Carillion, which collapsed with the loss of tens of thousands of jobs.
KPMG was Carillion's auditor prior to its demise, and is likely to face a hefty regulatory fine in the coming months as the Financial Reporting Council concludes its investigation.
More stringent restrictions imposed by regulators mean restructuring teams in audit firms are now far more limited in the roles they can assume on corporate restructurings if the company has been audited by them in recent years.
KPMG has also grappled with a leadership crisis in recent weeks, with the UK chairman Bill Michael submitting his resignation after making a number of ill-judged comments on a call with colleagues.
The firm recently disclosed that its partners had taken steep pay cuts for last year, although they still earned an average of more than £500,000.
It has also sold its pensions advisory business to a buyout backed by Exponent Private Equity.
KPMG and HIG Europe declined to comment.
