EY's Baldwin says rationale for break up remains

By Divya Chowdhury

DAVOS, Switzerland (Reuters) -Breaking up EY into separate consulting and auditing companies would have increased growth potential as the company grapples with the need for capital to invest in technology and AI to stay competitive, EY's global managing partner Andy Baldwin said on Tuesday.

The "Project Everest" plan to spin off EY's consultancy activities, closely watched by KPMG, PwC and Deloitte, who along with EY make up the "Big Four", was paused last year due to opposition from the company's U.S. partners.

Baldwin told Reuters' Global Markets Forum at the World Economic Forum in Davos that EY expects "double-digit" growth under EY's new CEO Janet Truncale and her three-year strategic plan from July as the firm invests in technology and AI.

The strategic rationale for a split had not gone away, however, Baldwin said.

"Obviously the separation would have unlocked a lot more market growth potential," Baldwin said. "I don't see us revisiting the sale of the consulting business in the short term."

The plan meant EY, a $50 billion business, took a closer look at its assets, particularly in technology, and how to monetise them with a sale due to be announced in February to drive revenue, he said.

The break-up plan had also led to EY, a partnership, to think more like a company in terms of efficiency as it faces the high cost of mandatory change in auditing clients at a time when the Big Four need capital to invest in a range of activities.

More countries are introducing a requirement for companies to "rotate", or regularly switch auditors, to ensure independence of book-checking. It means auditors such as EY have to bid more frequently for mandates, an expensive process.

Increasing use of AI will mean "hiring plans will come down" as not so many people will be needed, though "wholesale job losses" are not expected, Baldwin said.

(Join GMF, a chat room hosted on LSEG Messenger, for live interviews: https://lseg.group/3TN7SHH)

(Reporting Divya Chowdhury in Davos, additional reporting by Anisha Sircar and Mehnaz Yasmin in Bengaluru, writing by Huw Jones in London, Editing by Louise Heavens)