The Wall Street Journal has an article today suggesting that the EY audit/consulting split may not be the big money pay day EY is banking (heh) on. Why? Consulting is a competitive market and the economy isn’t looking so great these days, and EY’s separated consulting biz will not necessarily have the brand recognition in the space to start. It seems most of EY’s focus has been on independence rules standing in their way and presuming that should these rules magically disappear due to a split, the money will follow. In July, EY Global Chairman and CEO Carmine Di Sibio said a split “would win its consulting division up to $10bn in extra fees by liberating it from conflicts of interest that block partnerships with the world’s largest tech groups,” ignoring that the world’s largest tech groups already have consultants they pay an arm and a leg to. Is EY going to have its hopes dashed?
The consulting business, once separate, will continue to invest in technology to expand its offerings to clients, EY said, declining to provide specifics. The consulting-only firm plans to focus on winning new clients in areas such as technology, financial services, private equity, government and life sciences, EY said. About 75% of its tax practice will become part of the consulting firm, while the remainder will remain part of the auditing business, which will also offer some tax and advisory services, EY said.
This is going to cost money. A lot of money. And it will require people, something that seems to be in short supply these days.
Setting up a separate consulting brand could cost EY hundreds of millions of dollars, according to estimates from researchers that cover the industry. Those funds would go toward marketing, new employees and office space, said Fiona Czerniawska, chief executive at Source Global Research.
The consulting firm, which doesn’t have an official name yet, has to make sure its branding doesn’t confuse prospective or existing clients, she said. “EY is going to have to carve out something that’s distinctive and different in an environment which is already very crowded,” Ms. Czerniawska said.
Good luck with that ig?