Ernst & Young Halts Breakup Plan After Revolt by U.S. Leaders
Ernst & Young has axed its plan for a split of its auditing and consulting arms, marking a dramatic and costly retreat from a proposal that was meant to reshape the accounting profession but ended amid bitter infighting between leaders, countries and practices.
Global leaders of the Big Four firm said Tuesday they were “stopping work on the project” because the heads of EY’s U.S. arm, the biggest member of the global network, had decided not to move forward, according to a note sent to EY’s 13,000 partners.
EY has spent more than a year, and over $100 million, on the project, which was due to culminate in a public sale of a stake in the consulting business later this year.
EY’s global leaders said in the note to partners that they remained committed to the principle of splitting the auditing and consulting businesses. But it isn’t clear how a split could be redesigned in a way that achieves consensus, given the failure of intense negotiations over recent weeks to rescue the deal.
“We thought we had something everyone would sign up to,” one person close to the deal said. “This means going back to the drawing board.”
The failure of the project marks a humiliating rebuff for
Carmine Di Sibio,
EY’s global chairman and chief executive, who championed the planned split. The future of EY’s global and U.S. leaders is uncertain, given the turmoil in the firm, one person familiar with the matter said.
Mr. Di Sibio had originally been scheduled to retire in June but was granted a two-year extension to see the proposal through and was nominated to lead the newly created consulting firm.
His plans were undone by a revolt among U.S. audit leaders who complained that the consulting business was getting the bulk of the firm’s lucrative tax business. The auditors, joined by an influential group of retired partners, were concerned that the split would leave the audit business too weak to compete.
The split entailed getting approval from partners in dozens of countries and hinged on a complicated plan to raise cash to pay the audit partners for giving up the consulting business.
That plan faced headwinds from rising interest rates and volatile markets. EY had planned for the consulting business to borrow billions of dollars and raise billions more from an IPO to pay auditing partners, as well as fund pensions for retired partners.
EY’s effort was closely watched in the accounting industry, which has moved aggressively into consulting operations despite potential conflicts of interest.
Write to Jean Eaglesham at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Ernst & Young has axed its plan for a split of its auditing and consulting arms, marking a dramatic and costly retreat from a proposal that was meant to reshape the accounting profession but ended amid bitter infighting between leaders, countries and practices.
Global leaders of the Big Four firm said Tuesday they were “stopping work on the project” because the heads of EY’s U.S. arm, the biggest member of the global network, had decided not to move forward, according to a note sent to EY’s 13,000 partners.
EY has spent more than a year, and over $100 million, on the project, which was due to culminate in a public sale of a stake in the consulting business later this year.
EY’s global leaders said in the note to partners that they remained committed to the principle of splitting the auditing and consulting businesses. But it isn’t clear how a split could be redesigned in a way that achieves consensus, given the failure of intense negotiations over recent weeks to rescue the deal.
“We thought we had something everyone would sign up to,” one person close to the deal said. “This means going back to the drawing board.”
The failure of the project marks a humiliating rebuff for
Carmine Di Sibio,
EY’s global chairman and chief executive, who championed the planned split. The future of EY’s global and U.S. leaders is uncertain, given the turmoil in the firm, one person familiar with the matter said.
Mr. Di Sibio had originally been scheduled to retire in June but was granted a two-year extension to see the proposal through and was nominated to lead the newly created consulting firm.
His plans were undone by a revolt among U.S. audit leaders who complained that the consulting business was getting the bulk of the firm’s lucrative tax business. The auditors, joined by an influential group of retired partners, were concerned that the split would leave the audit business too weak to compete.
The split entailed getting approval from partners in dozens of countries and hinged on a complicated plan to raise cash to pay the audit partners for giving up the consulting business.
That plan faced headwinds from rising interest rates and volatile markets. EY had planned for the consulting business to borrow billions of dollars and raise billions more from an IPO to pay auditing partners, as well as fund pensions for retired partners.
EY’s effort was closely watched in the accounting industry, which has moved aggressively into consulting operations despite potential conflicts of interest.
Write to Jean Eaglesham at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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