EY could radically reshape the Big Four: the multinational is weighing a historic separation of its audit and advisory businesses
Ernst & Young – also known as EY – is considering spinning off and launching an initial public offering (IPO) for its global consulting segment, according to the Financial Times. This would undoubtedly disrupt the consulting market.
EY, which together with PricewaterhouseCoopers, Deloitte and KPMG form the so-called Big Four, the four most important companies in the world in the consulting and auditing sector, is considering spinning off and launching an initial public offering (IPO) for its global consulting segment, according to the Financial Times. This would undoubtedly disrupt the consulting market.
The 312,000-employee professional services firm is considering a historic break-up of its business as a solution to conflicts of interest that have dogged the profession and attracted regulatory scrutiny.
Carmine Di Sibio – CEO de EY – and his most senior colleagues are weighing a historic separation of EY’s audit and advisory businesses after years of criticism over perceived conflicts of interest between the two.
We understand the rationale that has led EY to consider this break-up.
For Big Four advisory practices, restrictions on working for audit clients are a drag on growth while investments in audit improvement have sapped capital investment from their consulting businesses.
Selling advice on digital consulting and M&A has helped drive the Big Four’s revenues to record levels but their advisory arms face competitors that are not constrained by audit conflicts. Accenture, which became independent from auditor Arthur Andersen in 2000, reported revenues of $51bn last year, almost double EY’s advisory sales.
Although they intend to spin off their business, separating their audit and advisory operations, Di Sibio assured that nothing has been decided and that they are analysing which strategic option to take.
And for the moment we are only left to stipulate and try to predict possible future scenarios.
If realised, the move would be a major change in the traditional operating model of the Big Four. It would disrupt the traditional operating model of these giants. It would also, according to the Financial Times, generate huge profits for the EY partners who run the company. One of the biggest questions is, if an IPO finally crystallises, which branch, consulting or auditing, would take over the brand.