Partners at EY could be in line to receive windfalls worth $8m (£6.5m) each, if the accountancy firm pushes forwards with plans to split out its audit and advisory operations into two separate firms.
Thousands of the Big Four firm’s partners could receive millions in windfall payments each, as part of EY’s plans to break up its global business, in what could be the biggest shakeup to the Big Four in decades, according to internal documents seen by the Wall Street Journal.
The plans could see EY float its consulting business on the stock market, with a view to raising $10bn by selling off 15 per cent of shares in the new advisory firm.
A further 70 per cent of shares in the consulting business will be given to the consulting firm’s partners, while the remaining 15 per cent will be reserved for stock awards, which for the most part will be paid out to staff.
Distribution of shares would in turn see each partner given shares worth seven to nine times their annual salaries, meaning the firm’s consulting partners could receive windfalls of up to $8m each.
However, most of the cash generated through the initial public offering (IPO) would be used to pay off partners in EY’s less lucrative audit business.
The payoff would see US and UK partners in EY’s audit business receive cash payments from the consulting business IPO, at rates of around two to four times their annual salaries, meaning audit partners could be lined up to receive windfalls of more than $2m each.
EY now plans to come to a decision before the 4th July, after news of the planned split was leaked last month, following meetings between EY executives and bankers from JP Morgan and Goldman Sachs on the 17th and 18th May.
The plans come as a means of escaping the conflict-of-interest that have plagued the Big Four for years, amid mounting public and regulatory scrutiny over the potential conflicts between those tasked with auditing major companies and those seeking to sell advice to those same firms.
A split would follow in the footsteps of Accenture, which split off from auditor Arthur Andersen at the turn of the millennium. Former “Big Five” auditor Arthur Andersen later collapsed under the weight of the Enron scandal, as Accenture continues to thrive.
The planned split comes as EY faces multi-billion-dollar lawsuits over its audits of Abu Dhabi healthcare provider NMC Health and German payments processor Wirecard.
An EY spokesperson told City A.M. “We are in the process of evaluating strategic options that will drive value for all our stakeholders – EY people, clients, and partners – and serve the public interest.”
“We undertake this evaluation from a position of strength across all aspects of our business and all regions across the EY Global network.”
“No decision has been made. Any option we choose would build on that position of strength and provide the whole EY organization with a compelling future with opportunities for EY people, one that sustains high audit quality, and advances our purpose of building a better working world.”
“Any significant changes would happen in consultation with regulators and after a vote of approval by EY partners.”