OPINION: The proposed separation of the audit and consulting arms of professional services firm EY is not necessarily about human greed.
There are two schools of thought about EY’s move to split off its consulting business and list it on a stock exchange or sell it.EY’s sale of its consulting business would provide a windfall for partners.Essentially, a group of people who paid very little to buy into the firm and would have got very little when they left, want to monetise the millions of dollars in salaries they would lose when they retire.
The second school of thought about the EY split is that the partners have worked out the only rational response to a business model bedevilled byEvery time the audit side of the business gets a new client, the consulting side of the business cannot provide services to that client. This satisfies the regulators but harms the cross promotional opportunities.
“It is in the interests of the owners of the firm to demerge because the benefits no longer outweigh the disadvantages that come from increased regulatory scrutiny.” “But after the listing, all the big mover and shaker partners stayed until their golden handcuffs expired. Then they left and the firm’s talent was hollowed out.”Moloney says Booz Allen went from being the top consulting firm out of the big four to being at the bottom. The consulting business was sold to PwC and the rump became a specialist provider of technology services to the United States government.
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