EY's split plans in limbo as auditors demand larger part of tax practice

31 March 2023 Consulting.us 2 min. read
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EY’s leaders continue to negotiate about how the tax practice will be divvied up in a proposed bifurcation of the global network.

Julie Boland, head of EY US and appointed head of a proposed independent EY audit business, earlier this month called for a reworking of the deal.

At issue is the global accounting and consulting firm’s lucrative tax practice, which has more than 70,000 people. Audit partners from EY US want more than one-quarter of the practice offered to them in the initial plan.

US partners hold a high-degree of influence in the breakup proceedings, as the US member firm of EY makes up approximately 40% of global revenue.

EY's split plans in limbo as auditors demand larger part of tax practice

US partners also want EY to re-examine its ambitious revenue targets for the spun-off public consulting company; an initial 25% annual growth rate has already been softened to 19% amid a worsening economic climate.

A reduction in revenue projections as well as a smaller tax practice would lower the consulting division’s IPO value. Initial plans for the company called for selling a 15% stake to the public for about $11.5 billion and borrowing $18.5 billion to fund seven-figure cash payouts to audit partners, who would lose a stake in the faster-growing consulting business.

EY executives are growing anxious over how the disrupted execution of the split deal may damage company reputation and employee morale, people familiar with the matter told The Wall Street Journal.

Leaders from various parts of EY’s global network met for two days in New York approximately two weeks ago to work out a deal, though WSJ’s sources said the talks were unsuccessful.

There is an internal deadline of “weeks” to resolve the impasse with US audit partners or else scrap the deal, sources said.