EY sees other Big Four companies reflecting the proposed split

LONDON, December 6 (Reuters) – Splitting EY into separate accounting and consulting firms will help pay rising tech bills and be ‘inevitably’ copied by competing ‘Big Four’ firms, a senior EY official has told one Reuters Breakingviews Podcast.

Andy Baldwin, global managing partner, said EY is holding roadshows to declare a “compelling case” for the company’s third attempt to split in two – if partners around the world show their support in the first quarter of next year give when voting.

If ratified, the breakup of a nearly $50 billion company would represent the biggest industry shock since the collapse of Arthur Andersen, the accountant implicated in the Enron scandal and whose downfall the “Big Five” in 2002 ‘ reduced to the ‘Big Five’. Big Four” by PwC, Deloitte, KPMG and EY, formerly Ernst & Young.

“It was an appropriate time to dust off the work we’ve done previously,” Baldwin said.

“I think it’s inevitable now. We believe there is a first mover advantage. We also believe that at some point the competition will also have to react,” he said. Some of the other Big Four firms have said they have no plans to copy EY.

Critics warn that by splitting up the business, the auditing side could suffer in the shadow of the traditionally more lucrative consulting work. According to EY, the split will make it easier to raise capital for investments and create two more agile companies.

“We want our insurance business to continue to be as successful as it has been for the past 10 years,” said Baldwin.

Rejection of partners because of the content of the deal would be an issue, he said.

But if the deal was rejected because of its timing amid troubled financial markets, then it could be voted on again at a later date because the deal’s fundamental drivers will not change, Baldwin said.

“It may come at a time, so our plan is that next year we proceed with what we call a soft separation and begin to run these two businesses separately, although they will continue to be part of EY’s sole business . ‘ said Baldwin.

Reporting by Huw Jones Editors of Mark Potter

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