The Financial Times was one of the news outlets that reported last week about EY China saying it wasn’t going along with Carmine Di Sibio & Co.’s plans to split EY into separate auditing and consulting entities. Not because EY partners in the firm’s Mainland, Hong Kong, Taiwan, Macau, and Mongolia offices don’t wanna become rich (presumably) but because the plan isn’t up to snuff with Chinese regulators.
EY’s global chair and chief executive Carmine Di Sibio said on Thursday that the firm’s Chinese operations had been excluded from the deal, meaning its consultants will remain tied to the firm’s audit business.
“The one country of the top 15 that we will need to do more work on is China,” Di Sibio said.
EY has failed to devise a deal structure deemed satisfactory by Chinese regulators. The firm does not disclose the fees it makes in China, but last year it generated revenues of $6.6bn in Asia Pacific, roughly $800mn more than a year earlier.
Fortunately for EY China employees, Carmine isn’t sending them to purgatory (i.e., KPMG in China) because of China’s lack of cooperation; the firm’s arm in China, and any other EY member firm that rejects the split, will stay as part of the global audit firm, FT reported.
[T]hough their consultants could then face competition from the spun out advisory business.
Ooooo, current EYers and former EY/NewCo-ers battling it out for consulting and advisory supremacy. That could be fun.
EY China said in a statement that it will “maintain our current structural organization to provide greater China clients with a wide range of services,” according to FT. The statement also said:
“In view of the differences in the market and regulatory environment of the member institutions in the EY network, each member institution can independently decide whether to participate in the spin-off plan according to its own governance rules.
“Based on factors such as the business environment and development stage in the region, all member firms of EY greater China . . . will not participate in the EY global spin-off plan.”
Carmine and the other bigwigs at EY gave the green light for the split on Sept. 8. Now we wait for all the partners to vote worldwide, which is expected to happen between November and January 2023. Most people believe the split will happen. Of course, we’ll keep y’all posted if/when it does.
EY China opts out of firm’s radical break-up plan [Financial Times]