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January 27, 2023

Sounds Like the EY Split is Going Forward Whether Partners Want It to Or Not

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EY Global Managing Partner Andy Baldwin was on a Reuters Breakingviews podcast recently and in the interview — besides suggesting that other Big 4 firms will follow EY’s lead toward a split despite these other firms saying they have no plans to do that — he made it sound like the split is happening one way or another. Even if it doesn’t actually happen.


Rejection from partners over the substance of the deal would be a problem, he said.

But if the deal was turned down because of its timing in unsettled financial markets, then it could be voted on again at a later date given the fundamental drivers of the transaction won’t change, Baldwin said.

“It may come to timing point, so our plan is that we will continue to what we call soft separation next year, and continue to start to run these two businesses separately, albeit they will continue to be part of the single enterprise of EY,” Baldwin said.

People on the inside have said that the split is delayed as the firm hammers out the details, mostly legal. Wrote FT last month:

The main stumbling block in setting dates for ballots is finalising the so-called global framework agreement, the legal document covering details of how assets, liabilities and people will be split between the businesses.

EY will then need to prepare information documents explaining to partners which business they will be assigned to and the terms of the deal, including the likely size of payouts — cash for auditors and shares in a listed company for the consultants.

Many staff in the 365,000-person firm still do not know which organisation they will be assigned to because the audit business will retain some experts in areas such as tax valuation to assist with checking financial statements and to rebuild the audit firm’s advisory practice.

While the headline points have been agreed, negotiations over several detailed issues have not been completed, a person familiar with the matter said.

Ballots were supposed to start rolling out to voting partners last month. According to FT, EY leaders expect the voting process to be done by February or early March and have tentatively “penciled in” an IPO of the consulting business on U.S. markets by this time next year.

EY sees other Big Four firms mirroring its proposed split [Reuters]

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