Ernst & Young's Pensions Debt Slows Negotiations Over Historical Split: Report
- Ernst & Young’s effort to split its audit and consulting businesses has hit a speed breaker due to change in U.S. leadership and complications regarding its debt, the Wall Street Journal reported citing people familiar with the matter.
- A decision by the firm is now expected in mid-August at the earliest, according to internal EY documents.
- Carmine Di Sibio, EY’s global chairman and CEO, said the firm had record revenue of more than $45 billion for the fiscal year ending June 30, up 13% Y/Y.
- Related: Ernst & Young CEO Expects $10B From Tech Giant Contracts After Historical Business Split: Report.
- The audit partners expect considerable payouts for agreeing to let the more lucrative consulting business go off independently. The payout depends on the amount of cash used to cut the debt.
- Around $10 billion is promised payouts to retired partners, which is effectively an unfunded pension plan, according to the people familiar with the matter.
- Another issue includes the length of the so-called noncompete agreement, which would stop the mostly audit firm from going after the same business as the new consulting company.
- Also Read: SEC Fines Ernst & Young $100M Over Auditors Who Cheated On Their CPA Exams.
- The debt issue could also concern regulators, including the Securities and Exchange Commission, which could quash the deal.
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