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EY is reportedly set to dedicate $2.5bn (£2.06bn) to fund a series of acquisitions for its consulting business following its planned separation from the firm’s audit business, according to the Financial Times.
Senior members at the firm have also set aside a budget of up to $400m (£329.5m) to build a new brand for the consulting business, which will no longer use the EY name after the split is finalised.
It has been suggested by the people familiar with the firm’s plan that it plans to float a new company in New York to double the number of dealmaking, as it fights to win market share from its Big Four rivals and standalone consulting firms.
EY has completed 200 deals in the past nine years, bringing in about $1.5bn (£1.24bn) of annual revenue. The firm had revenue of $45bn (£37bn) globally in the last fiscal year, while in the current year it expects to buy companies with about £329.5m in annual revenue.
Targets would include firms that offer advice on corporate strategy, technology or environmental, social and governance (ESG) issues, as well as niche law firms outside the US, according to the FT.
Andy Baldwin, global managing partner for client service at EY, said: “Splitting from the audit business would make acquisitions more attractive for the spun-out consulting arm because it would no longer have to terminate relationships with clients of the acquired company that are audited by EY.
“Every potential acquisition, on average 25% of the revenue we have to say goodbye to on day two because we audit it. We won’t have that conflict any more.”
Cornelius Grossmann, global head of law for EY, added: “When we spoke with law firms that wanted to join us, conversations stopped when they learned about our independence rules, which would have meant a cut of 20% of their business. Now we can have these discussions.”
The Financial Times also reported that other investment plans after the spin-off include a surge in senior hiring and a boost to technology investments for the tax advisory business.
