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Big Four consulting firm Deloitte is scaling back its UK deals business to focus on higher value transactions after a review of its profitability, in a strategic shift away from work it has done for decades.
Deloitte will shrink its regional deals advisory practice, which often works on smaller transactions, according to several people familiar with the changes. It is also retreating from acting as lead adviser on financial services and intellectual property deals.
All of the Big Four — Deloitte, EY, KPMG and PwC — face challenges in their regional M&A advisory businesses. Profit margins are lower than on big deals and the wider market has been very quiet.
Deloitte said: “We are considering restructuring parts of our advisory corporate finance business. This is in order to concentrate on larger, sector-focused M&A activity. As a consequence, we are proposing to close some parts of that business.”
It will continue to do some types of M&A work, such as due diligence, across all sectors, including for regional deals.
A person close to the firm said the decision followed a review of the profitability of the deals advisory business amid a challenging economic backdrop.
A former Deloitte partner said parts of the firm’s M&A advisory business had struggled to create enough profit to allow for investment in the business.
Another former partner said the firm’s deals business had “been a problem child for years”, adding: “It was always subscale — not big enough to be an investment bank and not small enough to be a boutique. It’s trapped between these two stalls and trying to be all things to all people.”
Partners at rival firms also said they stood to gain from the retreat, with opportunities to pick up clients and staff.
Last week, the Financial Times reported Deloitte was set to cut up to 100 jobs as part of a restructuring of its deals advisory practice. The firm said at the time that it wanted to concentrate on “larger, sector-focused M&A activity” and proposed to close parts of the business.
These job cuts will be split between the firm’s London and regional offices, according to one person familiar with the details, with a London-based team advising financial services clients among those set to be cut.
One of the former partners added that the decision showed Deloitte’s management was willing to make difficult decisions.
UK senior partner Richard Houston replaced half of his executive team in an unexpected management reshuffle after securing a second term leading the business in 2022.
“They are pretty ruthless. There’s a reason why they [are more profitable] . . . compared to some of the other Big Four. There’s a reason for that: there’s no sacred cows,” said the former Deloitte partner.
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