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EY Rejects TPG’s Bid For its Consulting Business

EY Rejects TPG’s Bid For its Consulting Business

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Ernst & Young’s audit and consulting businesses just can’t quit each other.

In the latest round of declaring their newly renewed everlasting love, EY recently rejected a bid from private equity giant TPG to take a stake in the consulting business and complete the firm’s now-scrapped divorce, according to a report Wednesday from the Financial Times. Fittingly for accountants, it seems love, like taxes, springs eternal.

Scaling Down Mount Everest

EY had its own plans to consciously uncouple its two major arms — an initiative internally dubbed Project Everest. The math was pretty simple: Spin off the consulting practice in search of an eventual $100 billion enterprise value on the stock market, enriching partners and freeing both arms from pesky conflict-of-interest rules in the process.

But EY ultimately decided it was better off sticking together, though that wasn’t enough to keep private equity at bay. In late July, the FT reports, TPG made its proposal — which highlighted why it could succeed where Everest failed:

  • According to the FT, TPG’s proposal included a more even split of the firm’s tax practice — which would have been mostly grouped in with the spun-off consulting arm under Project Everest, to the chagrin of some company partners.
  • The private equity group also said that a private transaction would free the firm from the finicky reaction of public markets and lead to less dilution of partners’ stakes.

Rejection: It’s unknown how much the $137 billion private equity player offered for the consulting firm in its proposed debt-and-equity deal, but EY turned it down nonetheless. “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,” Carmine Di Sibio, EY’s global chair and CEO, told partners in a note. Complicating any move forward is Di Sibio’s succession plan. The executive is due to retire next June, and has yet to pick a replacement. Yes, this is another major institution of corporate America embroiled in succession drama.