Deloitte boss rebuts EY’s case for splitting up

Joe Ucuzoglu doesn’t see other firms splitting

As EY’s plan to split itself in two was threatening to unravel on Thursday, Deloitte’s global boss went public with an unambiguous point-by-point rebuttal of the strategy.

In a 20-minute video posted on Deloitte’s website, Joe Ucuzoglu said the firm had considered separating its audit and consulting businesses, as EY hopes to, and had even spoken to bankers about doing so.

The conclusion, he said, was “not even a close call” and the idea that EY’s plan could be a “road map” for the profession, as the firm suggested, was wrong.

“Some of us have been around a while and we’ve seen this movie before,” he said. “History is littered with multiple examples of grand aspirations around these types of transactions that I’m sure sounded great and had pretty slide decks. Lots of big promises. It’s easy to get swept up in deal fever but this has actually never once played out as intended.”


Ucuzoglu said he was addressing Deloitte partners, in response to conversations and questions since he took charge of the firm in January.

“We have seen one IPO of a consultancy that culminated with the BearingPoint bankruptcy [and] two large trade sales of consultancies that generally are not looked back upon positively,” he said, in reference to a spinout from KPMG and sales by EY to Capgemini and PwC to IBM two decades ago.

Ucuzoglu’s opposite number at EY, Carmine Di Sibio, has said audit and consulting would grow more quickly as separate entities, freed from conflict-of-interest rules that limit what services can be sold to audit clients. Regulators are increasingly challenging the multidisciplinary model, supporters of the split argue.

Ucuzoglu disagreed. “I speak to a lot of regulators and not one has ever suggested to me or encouraged me in any way that we go down a path of structural separation...In fact, I have received quite a few questions from regulators recently, with their concerns about how the separation transaction would work.”

Under EY’s plan, codenamed Project Everest, the consulting firm would raise debt and equity to fund cash payouts to partners on the audit side. Partners in the consulting business would have their take-home pay cut and would instead receive shares they could sell over time. Some critics of the plan have argued it is aimed at enriching current senior partners.

“There is no free pot of gold, just trade-offs that people can debate,” Ucuzoglu said.

“A few of you who are closer to retirement have observed to me, quite astutely, that if when we’re nearing the end of their career, [a split] could look pretty good because if it all worked out well, you’d realise the upside, and if it didn’’re going to retire anyways.”

Ucuzoglu did not mention EY by name in the video and he said it was up to others to decide on their strategy. He conceded that “one of the other Big Four” may suffer particular pressure from conflict of interest rules because they audit a disproportionate number of technology companies — a clear reference to EY.

Deloitte’s path, he said, would be to “keep nurturing” the firm, “not tearing it apart”.

Copyright The Financial Times Limited 2023