Partners will vote on whether accounting firm EY should sever its consulting arm. Strategically it’s appealing. Logistically and mathematically, it’s a number-cruncher’s nightmare, says johnsfoley
The logo of Ernst & Young is seen in Zurich, Switzerland November 13, 2020. REUTERS/Arnd Wiegmann/File PhotoNEW YORK, Sept 9 - It’s easy to say a company should break up, but hard to make it happen. That couldn’t be more true of the plan to dismantle Ernst & Young, whose partnerson splitting the firm’s consulting business from its audit arm. Strategically it’s appealing. Logistically and mathematically, it’s a number-cruncher’s nightmare.
EY is carving itself up because regulators in the United Kingdom and elsewhere want it to, but also because it makes sense. Accounting firms often can’t audit companies which are also consulting clients, so being two separate firms, most likely with the consultancy as a public company, would let EY squeeze more milk from the cow. Chief Executive Carmine Di Sibio reckons thatThe devil really is in the detail, though.
trades at just under three times this year’s forecast revenue, according to Refinitiv. But none of the big U.S. accounting practices are publicly traded.in return for stock. Partners then watched in agony as the buyer’s shares fell 95% in two years, and EY rebuilt its consultancy once the non-compete agreement lapsed. This time there’s no acquirer’s stock to worry about, but valuation still matters.
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