After meeting on Labor Day, Ernst & Young executives are closing in on a plan to split the massive company
- Execs at the The Big Four accounting giant have been considering a move to split apart its businesses since this spring.
- The Wall Street Journal reported that EY leaders are expected to approve the proposal this week.
Ernst & Young's executive committee, in charge of a global organization spanning more than 300,000 staffers working across areas like auditing, consulting, and financial advisory, is finalizing a plan to split the Big Four giant into two separate companies.
The group of EY leaders met Labor Day to hash out the last details to a plan that would separate the firm's auditing business from its consulting services, Jean Eaglesham at The Wall Street Journal reported. The proposal is expected to be approved by the committee later this week, which will then trigger a vote among EY's 13,000 partners, sources familiar with the matter told the Journal.
EY currently audits some of the world's largest companies, including Amazon, Apple, Alphabet, Coca Cola, and General Motors. Sources told The Wall Street Journal that the separation of the firm's core businesses would enable the consulting practice to chase lucrative opportunities that are currently limited because of EY's existing audit relationships.
EY is expected to bring in more than $45 billion in revenue when it reports annual figures this fall, the Financial Times reported in July. The mechanics of the proposed transaction would see 60% of that revenue base spun off into a new, consulting company, while the other 40% would continue to audit businesses and keep the EY brand, the Journal reported this June. The consulting company would raise roughly $10 billion by selling a 15% stake in the public markets later next year, and also borrow some $17 billion, the Journal report detailed.
EY partners across both its consulting and audit businesses are the clear winners of the deal, named "Project Everest" within the firm. Within the audit practice, average partners in the US and UK could stand to receive multi-million dollar payouts each, depending on stock multiples, from the split, the Journal reported in June. Within the newly-formed consultancy, partners will receive shares in the separate company worth roughly seven to nine times their annual compensation.
Headquartered in London, EY's vast network of regional and national offices spans some 150 countries. Once the prospective split is finalized by the company's executive committee, voting on the plan by partners in those offices will take place between roughly the end of this year and early next, sources told the Journal, adding that at this point talks will also begin with the US Securities and Exchange Commission and other global regulators.