EY plans payout on global split of Big Four practice

EY’s Irish partners are being asked to vote on a global dissolution of the Big Four services firm that would separate its auditing business from its advisory services.

Management announced yesterday that, after a lengthy strategic review, it had decided to “split into two distinct, multidisciplinary organizations.”

If EY’s 10,000 global equity partners agree to the plan, the firm will split into an external assurance-focused partnership and a new global management advisory business.

Such a split would likely result in large windfalls for partners moving to the new consultancy, as they would have to be bought out of their holdings. It is understood that a public listing is an option that will be considered.

“There will have to be a crystallizing exit event,” said Frank O’Keeffe, managing partner of EY Ireland.

Country-by-country voting on the proposal is set to begin later this year and run through early 2023.

EY said it will now begin “ongoing collaboration” with partners to share full details of the plan with them ahead of the voting process.

“This is a really compelling opportunity,” Mr. O’Keeffe said, echoing EY’s official statement on the plan.

“This is a tremendous moment for professional services and EY is at the forefront. It is very clear that EY’s strength is how integrated we are in serving clients with a high level of consistency. It will be very similar in the new stores.”

The proposal comes as the Big Four are facing massive pressure from regulators around the world following scandals from the financial crisis.

The firms, which also include PWC, Deloitte and KPMG, have been plagued for years by allegations that their audit work is subordinated to more lucrative consulting engagements, which they often get from the same clients.

The reason for the strategic review of EY was its involvement in the Wirecard scandal in Germany, in which the company failed to uncover extensive fraud worth several billion euros at the payment processor. EY is now facing a class action lawsuit over shareholder losses from the now-bankrupt company.

The firm was fined $100 million in the US in June after regulators discovered that some of the firm’s auditors had cheated on ethics exams they were required to take for continuing professional development.

Mr O’Keeffe said the new proposed structure would allow the firm “to operate without perceptions of conflicts of interest”, but he insisted it was not driven by regulatory interference.

“EY is proud of its legacy as a leading global professional services organization,” the company’s statement said.

“The world is changing and we must adapt to continue to thrive and achieve our full potential while serving the needs of all our stakeholders.”

EY had global sales of $40 billion last year. Nearly $14 billion of that was accounted for by auditing alone, making it lucrative for a single business but far smaller than the combined businesses earmarked for the new company.

The Irish company consists of 2,000 employees and 116 partners in Dublin, Belfast, Cork, Limerick, Galway and Waterford. The global company employs more than 300,000 people.

https://www.independent.ie/business/world/ey-partners-in-line-for-payout-in-global-split-of-big-four-practice-41974268.html EY plans payout on global split of Big Four practice

Fry Electronics Team

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