EY has initiated an expansion of its private equity offering by appointing a new lead and investing $1 billion. The company has appointed Bridget Walsh as the new leader of the EY Global Private Equity segment, effective July 1st, 2022. EY has also earmarked $1 billion for expansion initiatives that include acquisitions, service enhancements, and new hires over the next four years.
The foray into private equity comes amid growing interest in private dealmaking. “The private equity sector has seen a big step up in activity last year with $1 trillion in deal activity,” says EY’s newly appointed Bridget Walsh.
By 2026, this amount could more than double to $11.12 trillion, representing 15.9 percent CAGR over five years, according to Preqin.
This immense opportunity has attracted attention from money managers across the globe. EY’s brand recognition could put it in a favorable position to capture some of these inflows.
Last year, according to a study by Brand Finance, EY was ranked U.K.’s third-most valuable brand, ahead of BBC, HSBC, Land Rover and Vodafone. EY was 82nd on Brand Finance’s global rankings this year. The company’s global presence, with offices in over 150 countries, and its newsworthy work with high-profile corporate and government clients were instrumental in Brand Finance’s calculations.
Despite its global presence, the majority of the company’s revenue is derived from operations in North and South America. EY has cemented its place as one of the Big Four accounting firms in the United States.
Nevertheless, EY faces significant challenges in its PE expansion. Rising interest rates and declining valuations in public markets could bleed over into private deals. Since these deals are not marked-to-market, it could be a while before the impact is fully realized.
Publicly-traded PE firms certainly seem to be reflecting this slowdown. Blackstone, Brookfield and KKR have lost between 25.5 percent to 35 percent of their market value year-to-date.
Deal volume has already decelerated, according to data published by EY itself. The monthly IVCA-EY monthly PE/VC roundup showed that PE/VC investments in April 2022 declined by 27 percent year-over-year.
With liquidity evaporating, EY could face more competition for deals in the near-term.
The company hopes that its existing relationships and extensive experience working with investment giants should help it stand out from competitors. “As an advisor to some of the most prominent private equity firms, we have a very successful global platform that offers clients services across sectors and industries,” says Walsh.