TPG Capital considers stake in EY’s consulting arm

Private equity group TPG Capital has reportedly approached EY with a plan to buy a stake in its consulting arm, the Financial Times has reported. 

A deal of this nature would enable the Big Four firm to revive a break-up plan to separate its audit and consulting business. EY reportedly abandoned the plan earlier this year after months of internal disagreements from US executives.

However, in a letter sent to EY’s global and US bosses, and seen by the Financial Times, TPG is said to have outlined a debt-and-equity deal which would separate the consulting business from EY’s audit business, allowing it to be floated on the stock market at a later date. TPG did not put a value on the consulting business in its letter, the FT noted. 

The FT said that both the firm’s global bosses and TPG have argued that a separation of the two businesses would free EY from conflict of interest rules that prevent consultants working for audit clients, with TPG suggesting a deal could unlock tens of billions of dollars of value.  

While the FT said it is “unclear” whether EY has responded to TPG, a source familiar with EY’s internal discussions told the paper that the “expectation is that the organisation will not pursue this expression of interest”. 

Under the proposed plan, EY’s audit operations would continue to be owned entirely by the partners who run it, and TPG would make an equity investment into the standalone consulting arm. 

EY and TPG Capital have been contacted for comment.