We reveal what EY global chief executive avoided talking about when he made his direct pitch to the firm’s staff about the benefits of splitting off its consulting arm into a separate company.
. The senior leaders at Deloitte, which is understood to review potentially splitting on a monthly basis, think that the advantages of having a combined operation outweigh the risks of splitting into two smaller firms.
EY was the auditor of Wirecard, a German payment processor that filed for insolvency in 2020 after admitting that €1.9 billion of cash on its books probably never existed. EY also audited Luckin Coffee, a Chinese coffee chain that filed for bankruptcy amid allegations its executives inflated income, costs and expenses.
NewCo would also be able to “expand alliances and strategy partnerships” and raise external capital to invest in “technology, solutions and people” and acquire other firms.A fourth slide reinforced that “any decision must lead to a sum greater than its parts”.A fifth “summary” slide noted that the firm’s leaders would pursue the split if they “believe [it would] unlock greater long-term value for all our stakeholders by becoming two purpose-led, standalone businesses”.
EY consulting partners should keep in mind the consulting firm BearingPoint. In 2001, KPMG floated its US consulting business as BearingPoint, while the firm’s UK and Dutch consulting businesses were sold to French IT services company Atos for €657 million. By 2009, BearingPoint had filed for Chapter 11 bankruptcy protection.
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