Business

EY rejects TPG plan to break up Big Four firm

US buyout group had proposed to take stake in consulting arm

TPG wrote to EY in late July outlining its plan for a debt-and-equity deal to separate its consulting arm from the audit business. Photograph: Steve Taylor/Getty

Stephen Foley
Michael O'Dwyer
Arash Massoudi
Wed Aug 16 2023 - 15:02

EY has rejected a proposal from US private equity group TPG to break up the Big Four firm and take a stake in its consulting business, according to a statement sent to partners on Wednesday.

TPG wrote to EY in late July outlining its plan for a debt-and-equity deal to separate its consulting arm from the audit business. The pitch came just months after EY’s own attempt to spin off the consulting business and seek a $100 billion (€92 billion) enterprise value for it in a stock market listing collapsed.

The Financial Times on Tuesday revealed the details of the approach, which offered to revive the break-up plan, code-named Project Everest, in a revised form.

“We frequently receive inquiries from private equity firms and other investors expressing interest in parts of EY businesses. This was the case before Everest and will continue into the future,” partners were told.

READ MORE

[ Bank of Ireland warns credit ratings could be affected by withdrawals made during IT outage ]

“The TPG approach was a preliminary expression of interest and there has not been further engagement. We are not actively engaging in any transactions. We remain focused on driving our current FY24 priorities, completing the CEO succession process, and developing the strategic path forward for the organisation.”

Under the plan, EY’s audit operations would have continued to be owned entirely by the partners who run it, and TPG would make an equity investment into the stand-alone consulting arm. It had said it was “highly confident” that it would be able to commit the sums required “from both TPG funds and our limited partners, without the participation of other financial sponsors”.

The consulting arm would also raise $19 billion in debt and the transaction proceeds would be used for cash payouts to audit partners and to settle other liabilities, TPG said.

TPG’s approach comes as EY attempts to select a new global chair and chief executive to replace Carmine Di Sibio, the driving force behind Everest, which unravelled in April after months of infighting.

Mr Di Sibio is due to remain in place until June 2024 but it would be difficult for the firm to commit to pursuing a deal before his successor is chosen. Any break-up would also need the backing of EY’s biggest national firms, which are separately owned by the partners in each country. – Copyright The Financial Times Limited 2023

LATEST STORIES