EY, formerly known as Ernst & Young, is one of the world’s largest professional services firms, offering a range of services in assurance, advisory, tax, and transaction advisory services to clients worldwide. It was founded in 1989 and is headquartered in London, UK.
EY’s assurance services include financial audit, sustainability audit, and other related services. Advisory services include management consulting, cybersecurity, risk management, and other related services. Tax services include tax compliance and tax advisory services. Transaction advisory services include mergers and acquisitions, capital transactions, and restructuring.
EY has a global presence with operations in more than 150 countries and employs over 300,000 people worldwide. The company is committed to promoting diversity and inclusion, sustainability, and social responsibility. EY has been recognized as one of the best places to work and has received numerous awards for its commitment to innovation, technology, and excellence in professional services.
EY is a member of the “Big Four” accounting firms, which includes Deloitte, PwC, and KPMG, and is considered a leading provider of professional services globally.
Founding History of EY
EY, formerly known as Ernst & Young, was founded in 1989 through the merger of two separate accounting firms, Ernst & Whinney and Arthur Young & Co. The merger brought together two of the largest accounting firms in the United States, creating one of the world’s largest professional services firms.
Ernst & Whinney (1849-1989)
Ernst & Whinney was founded in 1849 in Cleveland, Ohio, by Alwin C. Ernst and Theodore Whinney. The firm started as a small accounting and bookkeeping service for local businesses. Over time, it expanded its services to include auditing, tax planning, and consulting.
In the 1970s and 1980s, Ernst & Whinney grew rapidly through a series of mergers and acquisitions. It expanded its presence in the United States and established a global network of offices to serve clients in various industries.
Arthur Young & Co. (1906-1989)
Arthur Young & Co. was founded in 1906 in Chicago by Arthur Young and Stanley Ross. The firm initially provided accounting and auditing services to clients in the Chicago area. Over time, it expanded its services to include tax planning and consulting.
In the 1970s and 1980s, Arthur Young & Co. grew rapidly through a series of mergers and acquisitions. It established a global network of offices and expanded its services to include financial consulting, technology consulting, and human resources consulting.
Merger of Ernst & Whinney and Arthur Young & Co. (1989)
In 1989, Ernst & Whinney and Arthur Young & Co. announced their merger to create Ernst & Young. The merger brought together two of the largest accounting and consulting firms in the United States, creating one of the world’s largest professional services firms.
The merger was a response to the changing business landscape of the 1980s, which saw an increase in global competition and the need for larger, more diversified firms to compete effectively. The new firm, Ernst & Young, had a global presence in more than 140 countries and offered a wide range of services, including audit, tax, consulting, and financial advisory services.
Post-Merger Expansion and Diversification
Following the merger, EY continued to expand its services and global presence through a series of strategic acquisitions and mergers. In 1995, EY merged with The MAC Group, a consulting firm specializing in strategy and operations. In 2000, EY acquired Cap Gemini’s consulting business, which helped establish EY as a leading provider of technology consulting services.
In recent years, EY has invested heavily in technology and digital transformation to meet the evolving needs of its clients. In 2013, it acquired The Parthenon Group, a consulting firm specializing in strategy and mergers and acquisitions. In 2018, EY acquired Riverview Law, a legal technology firm, to expand its legal services capabilities.
Today, EY is a leading provider of professional services, employing over 300,000 people worldwide and serving clients in a range of industries, including financial services, consumer products, and technology.
Business Segments of EY
EY operates across several business segments, which are designed to help the firm serve its clients in different industries and with different needs. Here is a breakdown of EY’s main business segments:
Assurance
EY’s assurance business segment provides audit and financial reporting services to clients across a range of industries. These services help clients comply with financial reporting requirements, manage risk, and improve their financial performance. The assurance business segment also provides services related to sustainability reporting and environmental, social, and governance (ESG) issues.
Tax
EY’s tax business segment provides a range of tax advisory and compliance services to clients. These services include tax planning, tax compliance, transfer pricing, and tax controversy services. The tax business segment also provides services related to global mobility and human capital, helping clients manage their workforce across borders.
Advisory
EY’s advisory business segment provides consulting services to clients across a range of industries. These services include strategy consulting, operational consulting, risk management, and technology consulting. The advisory business segment also provides transaction advisory services, helping clients with mergers, acquisitions, and divestitures.
Transaction Advisory Services (TAS)
TAS is a separate business segment within EY’s advisory business, focused on providing services related to mergers, acquisitions, and other types of transactions. This includes services such as due diligence, valuation, and post-merger integration.
Strategy and Transactions
EY’s strategy and transactions business segment combines the firm’s advisory and TAS businesses to provide a range of services related to strategy, transactions, and corporate finance. This includes services such as M&A advisory, capital raising, and restructuring.
Consulting
EY’s consulting business segment provides a range of services related to digital transformation, technology implementation, and cybersecurity. This includes services such as IT strategy, enterprise architecture, data analytics, and cyber risk management.
Overall, EY’s business segments are designed to help the firm provide comprehensive services to its clients across a range of industries and business needs. The firm’s focus on sustainability and ESG issues, as well as its investments in technology and digital transformation, reflect its commitment to providing innovative solutions that meet the evolving needs of its clients.
What makes EY so influential?
EY’s influence can be attributed to several factors, including its size, scope of services, reputation, and thought leadership. Here are some key factors that contribute to EY’s influence:
Size and global reach: EY is one of the largest professional services firms in the world, with a vast network of offices in over 150 countries. This global presence allows EY to serve clients across industries and geographies, giving it significant reach and influence in the business world.
Comprehensive service offerings: EY offers a wide range of services across its various business segments, including audit and assurance, tax, advisory, and consulting services. This allows the firm to provide comprehensive solutions to its clients, helping them address complex business challenges and navigate regulatory and compliance requirements.
Strong reputation: EY has built a strong reputation over its long history for providing high-quality services and trusted advice to its clients. The firm has received numerous awards and accolades for its work, including recognition for its commitment to sustainability and diversity and inclusion.
Thought leadership: EY has a strong focus on thought leadership, producing research and insights on a range of business issues, including digital transformation, sustainability, and risk management. This thought leadership helps to position the firm as a leading voice in the industry and gives it a platform to influence business trends and practices.
Commitment to innovation: EY is committed to innovation and investing in new technologies and approaches to help its clients stay ahead of the curve. The firm has established innovation centers around the world and has developed a range of digital tools and platforms to help clients improve their operations and performance.
Overall, EY’s influence can be attributed to its size, scope of services, strong reputation, thought leadership, and commitment to innovation. These factors have helped the firm to establish itself as a leading professional services firm and a trusted advisor to businesses around the world.
How does EY makes money? – Revenue Streams of EY
EY generates revenue from a range of sources across its various business segments. Here are some of the key revenue streams for the firm:
Audit and assurance services: EY’s audit and assurance services include financial statement audits, integrated audits, and attestation services. The firm’s audit clients include public and private companies across a range of industries, and the fees charged for these services are typically based on the complexity of the audit and the size of the client. In addition to audit services, EY also provides other assurance services such as internal audit, financial reporting advisory, and sustainability reporting.
Tax services: EY’s tax services include tax planning, compliance, and consulting for businesses and individuals. The firm provides a range of tax-related services, such as transfer pricing, tax controversy, and global compliance and reporting. The fees charged for these services are typically based on the complexity of the tax issue and the size of the client.
Advisory services: EY’s advisory business provides a range of consulting services to help clients improve their performance and manage risk. The firm’s consulting services include strategy consulting, supply chain and operations consulting, technology consulting, and risk management consulting. EY also provides data analytics and cybersecurity services to help clients protect their businesses and assets. Fees for advisory services are typically based on the scope and complexity of the engagement.
Transaction advisory services: EY’s transaction advisory services help clients with mergers and acquisitions, divestitures, and other transactions. These services include due diligence, valuation, transaction structuring, and post-merger integration. The fees charged for these services are typically based on the size and complexity of the transaction and the services required.
Other services: EY also generates revenue from other services such as legal services, actuarial services, and corporate responsibility services. EY’s legal services are provided through a separate legal entity and include services such as corporate and commercial law, mergers and acquisitions, and dispute resolution. EY’s actuarial services help clients manage risk related to pension and other employee benefits plans. EY’s corporate responsibility services help clients manage their social and environmental impact and include services such as sustainability reporting and stakeholder engagement.
Overall, EY’s revenue streams reflect the firm’s focus on providing a comprehensive range of services to clients across a range of industries and geographies. EY’s expertise in a range of areas, global reach, and commitment to delivering high-quality services helps to position the firm as a trusted advisor to businesses around the world.
The Growth Story – How much did EY grow over the years?
EY has grown significantly since its inception and has become one of the largest professional services firms in the world. Here are some key numbers that illustrate EY’s growth story:
Revenue: EY’s revenue has steadily increased over the years. In fiscal year 2022, EY’s global revenue was $45.5 billion, up from $40 billion in fiscal year 2021.
Workforce: EY has also expanded its workforce significantly. As of 2021, EY has over 330,000 employees worldwide, up from just over 100,000 in 1998.
Global footprint: EY has a presence in over 150 countries, making it one of the most global professional services firms in the world. EY has expanded its footprint through acquisitions and strategic partnerships.
Audit market share: EY is one of the “Big Four” accounting firms, which together dominate the global audit market. EY’s audit market share has grown steadily over the years, and as of 2023, EY is the third-largest auditor in the world, with a market share of around 16%.
Innovation: EY has invested heavily in innovation and technology, which has helped the firm grow and stay ahead of the competition. EY has established several innovation centers around the world and has been at the forefront of developing new technologies and services in areas such as blockchain, AI, and cybersecurity.
Overall, EY’s growth story is one of consistent expansion and innovation. The firm has leveraged its global network, expertise, and reputation for quality to grow its business and maintain its position as one of the leading professional services firms in the world.
Growth Strategies of EY
Expanding into new markets: EY has been expanding into new markets through a combination of organic growth and strategic acquisitions. The firm has been investing in local talent and building partnerships with local firms to help it establish a foothold in these markets. EY has been particularly focused on expanding in emerging markets, such as Asia, Africa, and South America, where there is significant potential for growth. For example, EY has been investing heavily in China, where it has more than 20,000 employees and has been expanding its services to include consulting, tax advisory, and transaction advisory.
Diversifying its service offerings: EY has been diversifying its service offerings to provide clients with a broader range of services. In addition to its traditional audit and assurance services, EY offers consulting, tax advisory, transaction advisory, and risk management services. EY has been investing in technology to enhance its service offerings and provide clients with more sophisticated insights. For example, EY has developed a range of software tools and platforms, such as EY Canvas and EY Blockchain, that help clients manage their data and streamline their operations.
Investing in technology: EY has been investing heavily in technology to improve the efficiency of its operations and enhance its service offerings. EY has been using artificial intelligence and machine learning to analyze large amounts of data and provide more sophisticated insights to clients. EY has also been developing new software tools and platforms that help clients manage their data and streamline their operations. For example, EY has developed EY Canvas, a digital platform that enables clients to access EY’s services and expertise.
Focusing on sustainability: EY has been placing a greater emphasis on sustainability in its operations and in its service offerings. The firm has set ambitious sustainability goals for itself, including becoming carbon neutral by 2025. EY has been working with clients to help them address sustainability challenges and opportunities, such as climate change, renewable energy, and sustainable supply chains. EY has also been using its sustainability expertise to develop new service offerings, such as sustainability reporting and assurance.
Mergers and acquisitions: EY has been using mergers and acquisitions to expand its capabilities and enter new markets. For example, EY acquired Parthenon-EY, a strategy consulting firm, in 2014 to enhance its consulting services. EY also acquired Riverview Law, a legal services firm, in 2018 to expand its legal services. EY has also been investing in startups and emerging technologies through its EY Ventures fund.
Overall, EY’s growth strategy is designed to help the firm stay competitive in a rapidly changing market and capture new opportunities for growth. EY is positioning itself as a leading provider of professional services by expanding into new markets, diversifying its service offerings, investing in technology, focusing on sustainability, and pursuing strategic acquisitions.
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Not without Controversies – Financial Scandals covered by EY
EY has been involved in several financial scandals over the years. Here are some notable examples:
Lehman Brothers: EY was the auditor for Lehman Brothers, which filed for bankruptcy in 2008. After Lehman’s collapse, it was revealed that EY had approved the bank’s use of an accounting technique known as Repo 105, which allowed the bank to temporarily move assets off its balance sheet to make its financial statements appear stronger. The use of this technique was seen as a contributing factor to Lehman’s collapse. EY settled a lawsuit related to its audit of Lehman Brothers for $10 million in 2015.
Olympus Corporation: In 2011, it was revealed that Olympus Corporation, a Japanese manufacturer of cameras and medical equipment, had engaged in a massive accounting fraud. EY was the auditor for Olympus at the time of the fraud. Olympus had used fraudulent accounting practices to hide losses and inflate profits, and had paid large fees to advisors to help facilitate the fraud. EY was criticized for failing to detect the fraud during its audits of Olympus.
Wirecard: EY was the auditor for Wirecard, a German payment processor that collapsed in 2020 following revelations of a massive accounting fraud. Wirecard had inflated its revenue and profits for years, and EY had signed off on the company’s financial statements without detecting the fraud. The scandal has led to calls for greater regulatory oversight of the auditing industry.
Colonial Pipeline: In May 2021, Colonial Pipeline, a US-based pipeline operator, was hit by a cyberattack that forced it to shut down its operations. EY was the auditor for Colonial Pipeline, and was criticized for failing to identify and address cybersecurity risks during its audits of the company.
Satyam Computer Services: EY was the auditor for Satyam Computer Services, an Indian IT company that was involved in a massive accounting fraud in 2009. The company had inflated its revenue and profits, and EY was criticized for failing to detect the fraud during its audits of the company.
Anglo Irish Bank: EY was the auditor for Anglo Irish Bank, an Irish bank that collapsed in 2009 during the global financial crisis. The bank had engaged in risky lending practices, and EY was criticized for failing to identify and address the risks during its audits of the bank.
HealthSouth Corporation: EY was the auditor for HealthSouth Corporation, a US-based healthcare services company that was involved in an accounting fraud in 2003. The company had inflated its revenue and profits, and EY was criticized for failing to detect the fraud during its audits of the company.
Caterpillar: In 2017, it was revealed that EY had been sued by Caterpillar, a US-based construction and mining equipment company, for allegedly turning a blind eye to a $2 billion tax evasion scheme. Caterpillar had used a subsidiary in Switzerland to avoid paying US taxes, and EY was accused of failing to detect the scheme during its audits of the company.
These scandals have had a significant impact on EY’s reputation and credibility as an auditor. They have also led to increased scrutiny of the auditing industry as a whole, and have raised questions about the effectiveness of regulatory oversight. In response, EY has implemented measures to improve its audit practices, including increasing transparency and accountability, enhancing its risk management systems, and investing in technology to improve the quality of its audits.
Not the only one – Competitors of EY
EY competes with several other professional services firms that offer similar services, including audit and assurance, tax advisory, consulting, transaction advisory, and risk management. Here are some of EY’s main competitors:
Deloitte: Deloitte is one of the largest professional services firms in the world, with more than 330,000 employees in over 150 countries. Like EY, Deloitte offers a wide range of services, including audit and assurance, tax advisory, consulting, transaction advisory, and risk management. Deloitte is known for its strength in consulting, particularly in the areas of digital transformation and strategy.
PwC: PwC is another major professional services firm with a global presence. Like EY and Deloitte, PwC offers audit and assurance, tax advisory, consulting, transaction advisory, and risk management services. PwC is known for its expertise in tax advisory and has a large presence in emerging markets.
KPMG: KPMG is a global professional services firm with over 219,000 employees in 147 countries. Like EY, Deloitte, and PwC, KPMG offers audit and assurance, tax advisory, consulting, transaction advisory, and risk management services. KPMG is known for its expertise in forensic accounting and investigations.
Accenture: Accenture is a global consulting firm with over 600,000 employees in more than 120 countries. While Accenture does not offer audit and assurance services, it does offer a wide range of consulting services, including digital transformation, strategy, and technology services. Accenture is known for its expertise in technology and has been investing heavily in artificial intelligence and machine learning.
McKinsey & Company: McKinsey & Company is a global management consulting firm with a focus on strategy and management. McKinsey does not offer audit and assurance or tax advisory services, but it does offer consulting services in a wide range of industries, including healthcare, technology, and finance. McKinsey is known for its rigorous approach to problem-solving and has a reputation for working with the world’s leading organizations.
These are just some of the main competitors of EY, but there are many other professional services firms that offer similar services. EY competes by focusing on its reputation for quality and innovation, its global network of professionals, and its ability to provide clients with customized solutions to their complex business challenges.
