Big Four accounting firm EY plans floating stock market advisory business

Saturday, May 28, 2022 9:33 a.m.

EY plans to take its global consultancy business public, as part of ambitious plans to separate its audit businesses to create two separate firms.

The plan could see EY launch its tax advisory, advisory and stock market trading business, as the firm considers parting ways to escape the conflict-of-interest dilemmas the accounting industry has faced for years, according to the Financial Times.

By launching an initial public offering (IPO), EY hints at the possibility of generating a huge windfall, which could then be divided among the company’s existing partners and reinvested in the newly launched consulting firm.

In 2021, EY’s consultancy business, which employs 166,000 people, generated $26bn (£20.5bn) in revenue, compared to the firm’s auditing business which generated $14bn. dollars over the same period.

An EY listing could reflect consulting giant Accenture’s IPO in 2001, which saw the company raise $1.7 billion on the New York Stock Exchange, after selling shares at an initial price of 14 $.50 each. Accenture shares are currently trading at over $300 per share.

The plans come as the Big Four face growing public and political pressure over potential conflicts of interest that exist between their auditing operations and their consultancy business.

Any separation would come as a historic change among the Big Four putting enormous pressure on other major accounting firms to follow suit.

EY’s plan comes after the UK government laid out plans to upend the country’s audit industry, replacing the country’s current watchdog with a new, more powerful regulator and forcing the four most powerful auditors – EY, PwC, Deloitte and KPMG – to share audit work with smaller companies.

The review comes as the Big Four have found themselves at the center of a series of major accounting scandals over the past decade, involving some of the UK’s biggest companies including Carillion, Rolls Royce and Patisserie Valerie.

In March, the United States Securities and Exchanges Commission (SEC) also launched an investigation into potential conflicts of interest within the Big Four, between auditing and corporate advisory activities.

Any plans to split the business in two would require support from regulators and support from EY partners.

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