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Separation of the auditing and consulting operations will “create exciting opportunities”, it says.
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EY confirms intention to split, partners to vote
09 September 2022
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EY has confirmed it will split its global business into two separate components, one focused on auditing and one on consultancy, following a strategic review.
EY Oceania CEO and regional managing partner David Larocca said the firm’s leaders had decided to put the move to a vote of its 13,000 partners, around 700 of whom are in Australia.
“Having carefully considered various options, we firmly believe that we can embrace the changing landscape, build businesses that redefine the future of our professions, create exciting new opportunities, and deliver greater long-term value for EY people, clients and communities,” Mr Larocca said.
“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.”
Splitting the firm would allow the audit and non-audit components of the business to work for the same clients, something prevented under current regulations.
The eventual entities, dubbed AssureCo and NewCo under the proposal, would have combined revenue of around $US45 billion.
AssureCo would carry forward the assurance, tax and advisory services components of the business and continue to be a network of global member firms. With projected revenue of $18 billion a year, it would probably retain the EY brand, the firm said.
The consulting entity, NewCo, would be take the majority of tax, strategy and transaction and managed services to become a new multidisciplinary global corporate organisation with projected revenue of $US25 billion.
With a focus its clients’ growth, risk and transformation agendas, it “would enable these businesses to move faster to form new alliances, strategic partnerships, and develop new business models”, such as software as a service.
Partner Information Documents would be sent out as soon as possible, EY said, and the eventual split would take 12-18 months after the vote so would not take place before the end of 2023.
Mr Larocca said EY was proud of its legacy as a “leading global professional services organisation” but “the world is changing, and we have to adapt to continue to thrive and achieve our full potential, while we address the needs of all of our stakeholders”.
“We look forward to engaging with EY clients, people, partners and stakeholders to share our bold vision for the future that amplifies our purpose of building a better working world.”
Last month EY Australia reported revenue growth of 18 per cent to $2.75 billion, putting it second only to PwC among the Big 4 accounting giants.
EY’s consulting operation was responsible for $1.09 billion of that – a 24 per cent increase over the previous year – outpacing its tax and law services billings of $670 million, up 18 per cent, and assurance services, which grew 8 per cent to $570 million.
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