H.I.G. Capital Seeks £800 Million Exit from Interpath Advisory, Testing Peak Valuations in Restructuring Market
H.I.G. Capital Seeks £800 Million Exit from Interpath Advisory, Testing Peak Valuations in Restructuring Market
In the glass-walled offices overlooking London's financial district, a private equity gambit that began with regulatory necessity may soon culminate in one of the sector's most profitable exits. H.I.G. Capital is preparing to sell Interpath Advisory—the former KPMG UK restructuring practice it acquired just four years ago—for a staggering £800 million, effectively doubling its investment in a remarkably short timeframe.
| Category | Details |
|---|---|
| Seller | H.I.G. Capital |
| Target Company | Interpath Advisory (ex-KPMG UK restructuring unit) |
| Asking Price | £800 million |
| Original Acquisition | April 2021 for ~£400 million |
| Staff at Acquisition | 528 employees, 22 partners |
| Revenue (2021) | ~£130 million (EBITDA: £40 million) |
| Key Deal Rationale | Regulatory reforms (audit-advisory separation), growth in restructuring market |
| Notable Past Work | Intu Properties, Arcadia Group insolvencies |
| Current Sale Status | Early stages, potential buyers undisclosed |
| Market Context | Private equity exits via secondary buyouts amid subdued IPO activity |
From Regulatory Casualty to PE Crown Jewel
When H.I.G. acquired KPMG's restructuring division in April 2021 for approximately £400 million, the transaction was born not of strategic choice but regulatory imperative. UK audit reforms had forced the Big Four accounting firms to untangle their audit and advisory services, pushing KPMG to divest a highly regarded practice that had handled high-profile insolvencies including Intu Properties and Arcadia Group.
"The regulatory pressure that pushed KPMG to sell has proven to be H.I.G.'s windfall," notes one London-based M&A advisor familiar with the professional services sector. "What began as a compliance-driven carve-out has transformed into one of the most compelling value creation stories in the professional services space."
The £400 Million Metamorphosis
Since rebranding as Interpath Advisory, the firm has undergone remarkable transformation. Revenue has climbed from £130 million at acquisition to £163.6 million in fiscal year 2024—a 26% increase. Meanwhile, adjusted EBITDA has grown from £40 million to £46.3 million, though profit margins have contracted slightly from 31% to 28%.
Perhaps most striking is the headcount explosion—from approximately 528 staff at acquisition to over 1,000 today, reflecting aggressive investment in merger & acquisition and corporate finance capabilities. This strategic diversification beyond pure restructuring work has reduced revenue concentration risk while positioning the firm for growth beyond distressed scenarios.
Premium Pricing in a Cooling Market
The £800 million target valuation represents approximately 17.3 times Interpath's FY2024 adjusted EBITDA—a premium that has raised eyebrows among market observers.
"This pricing sits 200-250 basis points above the 75th percentile for comparable transactions," explains a senior partner at a competing advisory firm. "It's a rich multiple in a market where mid-cap professional services deals have generally re-rated downward since late 2024."
For context, when CVC acquired Teneo (which combines PR and restructuring services) in 2019, the multiple was estimated at 14-15 times EBITDA. AlixPartners' 2016 sale to Canadian pension funds CDPQ and PSP implied a 12-13 times multiple at a $2.5 billion enterprise value.
The Counter-Cyclical Conundrum
The ambitious valuation comes at a particularly intriguing moment in the economic cycle. UK corporate insolvencies remain 30-35% above pre-COVID levels, and the Bank of England is expected to maintain restrictive rates until late 2025. This environment should theoretically fuel demand for restructuring services.
Yet the forward curve now prices three-year gilt yields about 80 basis points lower than January projections, suggesting a potential softening of the distress pipeline from the second half of 2026 onward. Any buyer at H.I.G.'s asking price must therefore be comfortable underwriting earnings through what could become a waning restructuring cycle.
Bidding War or Reality Check?
Four distinct buyer profiles emerge as potential acquirers, each with different strategic rationales and hurdles:
Large private equity firms like Bain Capital, Carlyle, or Hg might pursue a buy-and-build strategy with an eventual IPO exit, though current leverage constraints and the rich entry multiple present challenges.
Strategic buyers such as AlixPartners or Alvarez & Marsal could view Interpath as an accretive bolt-on that fills gaps in their UK middle-market coverage while generating cross-border referral opportunities.
Intriguingly, the Big Four accounting firms themselves—including original seller KPMG—could attempt to reenter the restructuring space as non-compete clauses expire, though regulatory optics remain problematic.
Finally, a public market exit via SPAC or traditional UK IPO might exploit valuation arbitrage against listed peers like FRP Advisory, which trades at 11-12 times earnings, though current market conditions remain unfavorable.
The Paradox of Private Equity Dominance
Interpath's journey highlights a remarkable transformation within the restructuring advisory landscape. Today, approximately 78% of UK restructuring capacity is private equity-backed—a seismic shift from the accounting firm dominance of previous decades.
"The irony isn't lost on industry veterans," comments a former Big Four restructuring partner. "A sector that specializes in unwinding overlevered situations is itself becoming increasingly reliant on leveraged capital structures. That creates fascinating questions about talent retention and operational independence when debt markets eventually tighten."
Investment Outlook: Navigating the Valuation Stretch
For investors watching this transaction, several strategic angles emerge. Credit investors might demand cov-lite revolvers with springing covenants no higher than 4.5 times leverage, while seeking yields exceeding 700 basis points to compensate for risk.
Secondary private equity buyers should focus on Interpath's non-insolvency service lines, potentially structuring earn-outs tied to diversification metrics. Strategic acquirers might push for majority-equity structures with substantial partner reinvestment to mitigate flight risk.
Public equity traders tracking listed advisory firms like FRP and Begbies Traynor should monitor the transaction closely, as a successful £800 million valuation could potentially drive small-cap advisor multiples 1-2 turns higher.
For the transaction to generate mid-teens IRR, Interpath would need to grow EBITDA at over 12% compound annual growth rate for five years or deliver substantial strategic synergies. Without such performance, the valuation risks creating a 10 percentage point negative IRR delta for purely financial buyers—unless debt markets reopen aggressively.
The Verdict: Quality Asset, Ambitious Price
Interpath Advisory represents a high-quality, well-positioned asset with genuine diversification momentum in a sector with strong structural tailwinds. However, at approximately 17 times trailing EBITDA, the risk-adjusted return profile skews toward the downside for traditional sponsor transactions.
The most logical acquirers appear to be strategic buyers capable of integrating Interpath's 1,000-strong team into global platforms while generating revenue synergies. Absent such strategic logic, H.I.G. may ultimately need to recalibrate price expectations or structure the transaction with vendor financing components to bridge valuation gaps.
As one veteran restructuring advisor notes, "The ultimate price achieved will serve as a fascinating barometer for how the market values counter-cyclical advisory businesses at this particular moment in the economic cycle."
Note: This analysis is based on current market data and historical patterns. Past performance does not guarantee future results. Readers should consult financial advisors for personalized investment guidance.