Ernst & Young (EY) is all set to split audit and consulting units into two companies.
The move would separate EY’s accountants from its faster-growing consulting business, which advices on tax issues, deals and more.
In an interview to Wall Street Journal, Carmine Di Sibio (below), EY’s global chairman and chief executive, said: “This is something that will change the industry.”
The London-based company said it would provide its 13,000 partners with more information before voting on the split starts in one country at a time from late 2022. It is likely to conclude in early 2023.
Financial Times reported that EY, which counts companies like Alphabet, Amazon, Salesforce and Workday among others as clients, expects to report record revenue of $45.4 billion for its most recent financial year, up 13.5 percent from a year earlier.
Di Sibio also told WSJ that EY is planning to raise about $11 billion in a public sale of a 15 percent stake in the consulting company, which will also borrow some $18 billion. He said a large portion of this money would be used to pay partners, but declined to specify the amount.
There have been regulatory concerns over potential conflicts of interest among the Big Four accounting firms – EY, Deloitte, KPMG and PricewaterhouseCoopers – that their advisory services could undermine their ability to conduct independent audits.
The Financial Reporting Council, UK auditing and accounting regulator, had asked the firms in 2020 to separate auditing as a standalone business in Britain by June 2024. This was done following the corporate failures at builder Carillion and retailer BHS.
Deloitte and PricewaterhouseCoopers said earlier this year that they had no plans to restructure and would continue with their current business models.
“That’s to be seen, who’s wrong and who’s right,” Di Sibio told WSJ, adding that the proposed breakup “provides tremendous opportunities for our people, our clients and our partners.”
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