If recent reports on the planned split of EY’s audit and advisory businesses are to be believed, the Big Four firm’s Irish partners are in line for a significant financial windfall.
According to reports in the Wall Street Journal and the Financial Times, the break-up plan would involve an initial public offering of shares in the consulting business, with the audit side of the house, whose clients include Facebook, Google, Amazon and Oracle (all of whom have major operations in Ireland), remaining as a network of partnerships after the break-up.
A split would enable EY’s fast-growing consulting business to target audit clients who are currently off-limits because of the risk of a conflict of interest.
Earlier proposals had the senior partners getting much bigger multiples of their pay as windfalls, compared with more junior partners. The size of the senior partners’ windfall has been reduced as the plan has evolved. The value of the average expected payout for EY’s roughly 13,000 partners has been scaled back because of the stock market decline since the numbers were presented in May.
According to the reports, the firm is hoping to sell around 15 per cent of the consulting business for more than $10 billion, leaving 70 per cent in the hands of its partners, with another 15 per cent available for share awards to new joiners.
Partners in the new consulting business are expected to receive shares worth between seven to nine times their annual remuneration, potentially reaching a value of $8 million (€7.6 million). Partners in the audit business are set to receive a cash payout from the sale of shares worth around two to four times their annual pay under the plan, which would be about $2 million.
The plans are not set in stone and could change or be abandoned altogether. The current flux in global stock markets is not a good backdrop for planning an initial public offering of shares. If enacted, the split could happen next year.
Two groups who are certain to be following events closely, are those below partner level at EY, and its Big Four rivals. EY staff will surely want their contribution to the success of the firm to be handsomely recognised as part of a split. Given the huge sums involved, partners at Deloitte, KPMG, and PwC will be watching how EY’s plan plays out with one eye on a potential split of their own firms.
