Ernst & Young is exploring a public listing or partial sale of its global consulting business, part of the most radical transformation of the Big Four accounting firms in two decades, according to people with direct knowledge of the matter.
The prospect of a stake sale or listing for EY’s existing partners that own and operate the company is reminiscent of the initial public offerings of Goldman Sachs in 1999 and Accenture in 2001.
The 312,000-employee firm dominates the accounting profession along with Deloitte, KPMG and PwC and is the Consider a historic breakup It operates as a means of resolving conflicts of interest that plague the industry and give rise to regulatory scrutiny.
Ernst & Young The advisory business, which provides tax, advisory and transaction advice, generated $26 billion in revenue last year and employed 166,000 advisors.
Ernst & Young’s audit business, which generated $14 billion in revenue last year, is likely to remain as a partnership after the spin-off. Some advisers will turn to the audit division to support its work in areas such as taxation, the people said.
The newly independent consulting business has the option to merge into a single company, allowing it to receive outside funding through a sale or initial public offering.The new investment could help it grow and compete with larger consulting businesses such as Accenturewhich reported revenue of $51 billion last year and is valued at about $200 billion on the New York Stock Exchange.
The spin-off would also free up Ernst & Young’s consulting business to win jobs at firms audited by Ernst & Young, opening up a slew of potential new clients that are currently barred under stand-alone rules.
JPMorgan and Goldman Sachs are advising EY on their plans, people familiar with the matter said. The bank declined to comment.
The firm’s senior partners have yet to make clear recommendations to partners on whether to restructure and what form it will take.
Selling parts of the business to outside shareholders would be a radical departure. A senior partner at another firm said that selling some of the business and handing the windfall to a partner would significantly alter the existing structure, where “you come in naked and you leave naked” and put the business together. capital for the next generation.
The Big Four are networks of legally independent national member companies that pay annually to share brands, systems and technology. This setup prevents them from accepting outside investment and makes it difficult to push for sweeping reforms that require broad consensus across the business.
However, many accountants see Ernst and Young as the best among the Big Four to drive major international change because its global boss has more influence than rivals, whose general partners have more power.
Nonetheless, EY partners will still have the opportunity to vote on any changes. Asked if EY would place investors ahead of the vote, a person familiar with the matter said: “We are looking at the options. We will be looking at the right interests of all our partners.”
Ernst & Young and other professional services firms ‘the doorbell keeps ringing’ Private Equity Firms Seeking Investment In part of their business, the person said. An IPO would be more difficult to pull off than a private equity sale, the person added.
A breakup of Ernst & Young would force its rivals to decide whether to follow suit.
On Friday, PricewaterhouseCoopers, Deloitte and KPMG said they believed in the benefits of having audit and consulting businesses under one roof.
PwC said it had “no plans to change direction”, while Deloitte said it was “committed to our current business model”. KPMG said the multidisciplinary model “brings a range of benefits”.
A breakup may raise objections from some partners. Auditing has historically been less profitable and can have difficulty recruiting and retaining staff, especially professional partners, who generate most of their income from consulting but provide key expertise in areas such as tax, the big four partners said.
Ernst & Young declined to comment on the possibility of a stake sale or an initial public offering. Following news of the planned spinoff Thursday, global chief executive Carmine Di Sibio told employees in an email Friday that “no . . . a decision has been made.”