EY set to record global revenues of $45.4bn as talks over split drag on

EY has shared with its staff that it is expecting to report record global revenues of $45.4bn for the most recent financial year. It comes at a time when the attempts to win senior leaders’ backing for a break-up of its audit and advisory businesses are dragging on. The figure was shared on a call with 312, 000 staff members globally. It was hosted by the chair and chief executive, Carmine Di Sibio.

Little new information regarding the proposed break-up was shared with the staff. For those unaware, the separation would be the biggest shake-up of a Big Four group that has happened in about two decades.

The sales number is a 13.5% increase on the US$ 40 billion reported by the Big Four Accounting Firm for its previous financial year that ended in June 2021. Revenues of the organization increased 16.4% in local currency terms. Usually, EY reports its global revenues in September.

The jump is not surprising for industry experts as there has been a considerable increase in the demand for professional services. The other Big Four firms, PwC, KPMG, and Deloitte also reported increased sales last year.

PwC boss Bob Moritz shared sometime back that he expected his firm to report record revenues of about $50bn for the 12 months to June 2022. The Big Four firms do not disclose their global profits. So, no one knows how much they earn.

The Split

The split needs the backing of the global leadership of the firm. After that, it will be put to the vote in each national member firms that form the EY network. If the split happens, it will deliver multimillion-dollar windfalls for thousands of partners across the globe.

The potential split planning has been stalled due to several issues pertaining to the deal’s structure. It has failed to meet regulatory requirements in around 150 countries where EY has its operations. It includes rules in individual nations like China, where the audit business might retain more advisory divisions as compared to in other jurisdictions to win regulators’ approval.

A key issue has been dealing with regulated businesses such as EY Law, which has about 3,400 legal professionals worldwide. For instance, many nations have rules restricting legal advisory businesses being owned by a company.

EY assumed that legal and regulated tax-advisory businesses would be excluded from the deal and sold back to the partners running those divisions. Now, the firm expects around 80% of those revenues could be retained within the advisory business after any split.

The global bosses of the company are hoping that about 68 of the 70 largest member firms by revenue will agree to participate in the split. Discussions with national member firms have been held in tranches. These discussions started with the 15 largest. They account for over 80% of global revenues

EY is yet to comment on the matter. What do you think of the revenue growth and the split of EY? Let us know in the comments.





Previous Post Next Post