Deloitte picks up BMR's tax division after 2 years of sell-off talks

M&A, risk advisory practices headed KPMG's way

Professional services firm Deloitte is set to merge the lucrative tax practice of boutique advisory firm BMR Advisors with itself. This follows intense negotiations over the last two-three weeks between three possible suitors that also included two of the other Big Four firms, KPMG and PwC.

BMR’s M&A and risk advisory practices are likely to be picked up by KPMG.

When reached for comments, BMR Advisors said it will make a formal announcement on Tuesday.  Sources indicated that Deloitte on Monday internally informed its employees of the impending merger of BMR’s tax practice, that includes both direct and indirect taxes.  

With BMR’s tax practice in its fold – estimated to be valued at around Rs 120-150 crore – Deloitte will move up the pecking order when it comes to market share of the total tax advisory pie among the Big Four firms. The fast growing tax advisory business of the top four firms is pegged at around Rs 3,400 crore. As per industry estimates, EY with 35% share is the market leader, followed by PwC (25%), with KPMG and Deloitte necking it out for the rest.

“Deloitte will reduce the gap between market leader and give a tough competition to No. 2 place,” says a senior executive from one of the Big Four firms.

This is the second time over the last couple of years that BMR Advisors has been involved in sell-off talks. In the first unsuccessful round KPMG was close to merging the whole firm and all its practices with itself. However, differences cropped up over people and position related issues that led to scuttling of the whole process. Negotiations were re-started after a cooling off period of one year. But this time around more suitors threw their hat in the ring, including Deloitte and PwC.

Though supporting the move, the two founding partners, Bobby Parikh and Mukesh Butani, were not leading the current round of negotiations.  “There is kind of divergence in the interest of the founding partners and other partners in the firm,” said a source, a senior partner in one of the Big Four professional service firm, who was part of the negotiation process. Both Parikh and Butani are likely to pursue their own individual interests after hiving off the practices.  

With Parikh and Butani not being part of the deal, this will get reflected in the deal valuation, say industry players.  “There will be an impact on the premium multiples that the seller will command,” a source said.

BMR Advisors was set up by Mukesh Butani and Bobby Parikh in 2004, along with Rajeev Dimri. The group has been reworking its practice areas with more focus on direct and indirect tax and tax-related disputes.  In April this year a team of 38 lawyers, including six partners, of sister firm BMR Legal joined the M&A practice of Shardul Amarchand Mangaldas.

Most industry experts expect the fight for talent among the Big Four firms to intensify in the tax space. Following implementing of GST the firms have each cobbled up multi-disciplinary teams – of 200 to 400 heads – tapping into the market for GST-related services.