Ernst & Young leaders are expected to approve the accounting firm’s division plan

Ernst & Young leaders are expected this week to give the green light to a division of the audit and consulting business, paving the way for the biggest change in the accounting profession in more than 20 years, according to people familiar with the matter.

The global executive committee of the accounting giant, which oversees the company’s global network of 312,000 people, met on Labor Day to finalize the global disintegration planPeople familiar with the matter said. The committee is expected to approve the plan later this week, which will lead to a vote on the deal by nearly 13,000 EY partners, who are ready to make the decision. Unexpected winnings averaging over $1 million each.

The split, which began late next year, will lead to the dismissal of EY accountants who check the books of companies such as

Amazon a company

Her fast-growing advisory business advises on technology, deals and other issues.

Industry watchers said EY’s move could fundamentally reshape the accounting landscape if it goes as planned.

An EY spokeswoman said discussions were continuing and that “at this time, no decision has been made on moving to the next phase”.

EY is one of the Big Four firms that dominate scrutiny in the major financial markets and whose multi-billion dollar advisory arms compete with the likes of Accenture PLC and International Business Machines Corp.

“There is a good chance that other major companies will follow suit,” said Martin White, chief analyst at Source Global Research, an industry consulting firm. “Who wouldn’t want a huge salary if you thought it existed and wouldn’t cause it.” [your business] Long term damage? “

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EY’s opponents say they intend to continue auditing and consulting under one roof. Deloitte held exploratory talks with bankers After news of the EY plan emerged, the Wall Street Journal previously reported, but says it has no plans to split. A Deloitte spokesman said, “You will not separate our businesses and separate them, and we will not invest in the work of our collective life.” KPMG said in a statement that its current model brings “a range of benefits,” and PricewaterhouseCoopers said it is “fully committed” to its multidisciplinary strategy.

EY’s planned split will split its global network of nearly $45 billion in revenue 60:40 between the advisory business and the audit-focused partnership, which will retain the EY brand, according to the May edition of the proposal reviewed by the magazine. The new advisory firm was expected to raise about $10 billion by selling a 15% stake to the public at the time of the split, as well as borrowing $17 billion to help fund partner payments.

EY Partners have a strong financial incentive to support the deal. Audit partners are aligned with cash payments, which in June were expected to average two to four times the annual compensation. These complications may have decreased as markets have fallen in recent weeks. Still, the windfall is expected to be worth more than $1 million for typical US and UK partners, who earn an average of $850,000 to $900,000 a year, according to people familiar with the matter.

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On the advisory side, the partners promised stakes in the new company, which in June were expected to normally be worth seven to nine times their annual compensation, paid out over five years.

People familiar with the matter said Carmen Di Sibiu, EY’s global chairman and CEO, who spearheaded the proposed split, is in line with windfall profits amounting to tens of millions of dollars.

EY leaders are expected to say the split will be good for the company’s finances, as well as their finances, according to people familiar with the matter. These people said they hope the breakup will free up consultants to earn billions of dollars in new business, unfettered by independence rules that restrict the work accounting firms can do for audit clients.

Carmen Di Sibiu, Global Chairman and CEO of EY, spearheaded the proposed split.


picture:

Holly Adams/Bloomberg News

EY scans the books of a host of Silicon Valley giants, including Amazon,

sales force a company ,

a work day a company

And the father of Google

the alphabet a company

This limits its ability to compete in the rapidly growing field of consultants who collaborate with technology giants to sell outsourcing services to companies.

Once the carefully designed “go” decision is announced this week, the companies that make up EY’s global network of roughly 140 countries are expected to vote on the plans this fall and early next year, according to people familiar with the matter. People familiar with the matter said the decision, originally scheduled for June, was postponed to ensure that US leaders and other large member companies were happy with the proposal. Sticking points included treat around $10 billion in promised payments to retired partnersthe magazine reported previously.

The decision is also expected to signal the start of negotiations with the Securities and Exchange Commission and other regulators around the world who will need to sign the deal.

Oversight bodies are expected to be pleased with the reduction in potential conflicts of interest, a long-standing problem in the industry. They will want to make sure that EY’s audit-focused firm will be resilient enough to withstand potentially huge litigation damages, despite its sharply reduced volume.

EY faces billions of dollars in legal claims In Germany and the United Kingdom due to their alleged failed audits of Two corporate bombingsfintech company

wired card AG

and hospital operator NMC Health PLC. EY said it stands by its own audit business.

Another issue that needs permission from regulators is trademark. Paul Munter, the Securities and Exchange Commission’s acting chief accountant, said last month that after an accounting firm sold part of its business, the new entity should not profit from the accounting firm’s name or logo. He added that the two companies could not share any marketing or advertising.

New consultancy EY will have to spend a lot to build its new brand, according to Tom Rodenhauser, managing director at Kennedy Research Reports, which analyzes the consulting industry.

Andersen ConsultingAnd the

Rodenhauser, the advisory arm of the former Big Five, said he spent “millions and millions and millions of dollars” changing its successful brand to Accenture. EY Consulting will have to make the same type of investment.

Write to Jean Eaglesham at [email protected]

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