World's 3rd largest accounting firm Ernst & Young announces split

Global professional services firm EY( Ernst & Young), the third-largest of the Big Four, has decided to move forward with partner votes to separate into two distinct, multi-disciplinary organisations. This will create an $18-billion revenue audit firm and a separate but larger and faster-growing $24 billion consulting arm.

EY stated that the decision was taken after a strategic review. This is expected to separate its consulting and audit operations in certain jurisdictions into two separate organisations. However, in India, a distinction between audit and non-audit practices already exists with statutory audits being performed by another entity, SRBC & Co LLP. The implications of the global decision for EY’s operations in India are still to be known. 

The split of EY would result in multi-million dollar cash payouts to audit partners by the newly created consulting unit and share awards to consultant partners who move out.

Reports said the consulting business will go for an IPO, with plans to raise about $10 billion dollars by selling a 15% stake. It will reportedly borrow another $17 billion, much of which would be used to pay off the partners at EY’s traditional auditing business.

“The next steps include ongoing engagement with partners to provide them with more information in advance of the voting process. We expect this phase to continue through the end of the year, with voting expected to begin on a country-by-country basis in late 2022 and conclude in early 2023," said the statement.

The other three big firms of the "Big Four”,  Deloitte, PricewaterhouseCoopers, and KPMG have not made plans to cut their consulting practice from their accounting companies.

Published on: Monday, September 19, 2022, 08:13 PM IST