Inside EY’s brewing succession battle

One scoop to start: Brookfield Asset Management and Sequoia Heritage, a $16bn fund that manages the wealth of Silicon Valley, are investing $250mn each to create a new investment firm to capitalise on plunging valuations of venture capital-backed companies.

In today’s newsletter:

The race to run EY

EY’s much-debated break-up plan “Project Everest” barely made it off the foot of the mountain, as the FT revealed back in April.

Instead, the plan designed to liberate the Big Four group from conflict-of-interest rules that limit its consulting arm from working for audit clients has formed deeper divides between the two factions.

A power vacuum has been left in its wake as the firm’s global boss and chief spin-off proponent Carmine Di Sibio prepares to retire next year, the FT’s Stephen Foley and Michael O’Dwyer report.

Leading the succession sprint is Andy Baldwin, Di Sibio’s right-hand man and a key architect of the bungled break-up attempt, said multiple people inside or close to the firm.

The British executive is credited with helping integrate EY’s separate national firms during a three-year stint as head of the group’s European operations before becoming one of Di Sibio’s two deputies in 2019.

Some partners and former partners still close to the firm say that a period of “healing” could be better than another restructuring attempt, though.

The 57-year-old’s age — he would only be able to serve three years before hitting mandatory retirement age unless given an extension — has been raised as a potential issue.

“Andy is the favourite by a large margin, but things can get weird in a hurry,” said one person familiar with the candidates. “Like a UK Conservative party leadership contest.”

There’s also the Wirecard elephant in the room: Baldwin was in charge of the European region during the scandal. Julie Teigland, another executive said by several insiders to be considering running, was in charge of EY Germany while it audited the collapsed German payments group.

A more neutral candidate is EY’s Canada head Jad Shimaly, insiders say. The Lebanon-born executive was floated as a “dark horse” candidate who could potentially unite the firm’s duelling camps, said one person in attendance.

Marie-Laure Delarue, a French partner who oversees EY’s audit practice globally, was also mentioned as a contender.

Though not vying for the top job herself, US managing partner Julie Boland will be a key player in deciding who comes out on top. It was her opposition that ultimately killed Everest and it would be tough for Baldwin to win unless he can woo her over.

The final candidate will be selected by the global executive committee chaired by Di Sibio and then ratified by a group of prominent partners, so there are many hoops for all the candidates still to go through. Let the politicking begin.

Can Harvey Schwartz restore Carlyle to greatness?

Harvey Schwartz, the new chief executive of Carlyle Group, has a big challenge in reviving one of the pioneers of the buyouts industry: Its vaunted private equity operations have slowed to a crawl.

The New York and Washington-based investment group’s flagship US buyout funds raised just $300mn in capital in the second quarter, putting it about $16bn in fundraising below a prior fund and far short of a $22bn target set by Schwartz’s predecessor, Kewsong Lee.

The private equity unit deployed $1.8bn in capital, but its most prominent move last quarter was the investment it didn’t make after shocking Wall Street by backing out of a deal to buy a controlling interest in healthcare analytics company Cotiviti at a $15bn valuation.

The broad malaise in private equity has forced Schwartz, a former top executive at Goldman Sachs who was passed up for its top job, to focus on cost cuts and growing newer businesses spanning insurance, credit and capital markets that are removed from its historical speciality in buyouts.

This week Schwartz gave Wall Street a broader glimpse into his plans. But he has received a lukewarm reception from public stockholders. Shares in the private equity firm fell more than 7 per cent on Wednesday.

Profits at Carlyle, like other private equity firms, are dropping because slowing dealmaking markets make it hard to exit investments for a gain.

Schwartz, who said he was attracted to the role because of Carlyle’s discounted valuation, has valuable assets to work with including nearly $4bn of cash sitting on the group’s balance sheet.

He has recently named dealmakers John Redett and Lúcia Soares as chief financial officer and chief information officer, respectively, and vowed to take a “disciplined approach” to charting a recovery.

Wielding a potent scalpel appears to be one priority. Examining how to fairly compensate dealmakers and shareholders to account for the tougher environment is another.

“[We’re] basically doing a line-by-line review going through the business and making sure we’re super disciplined about expense,” he told analysts.

Job moves

• Kirkland & Ellis has poached senior private equity lawyer Alvaro Membrillera from the London office of Paul Weiss. It’s the latest high-profile pick-up in Kirkland’s London practice.

• The UK’s Financial Conduct Authority has named Clare Woodman, Morgan Stanley’s head of Europe, the Middle East, and Africa, as chair of its markets practitioner panel.

• The regulator also appointed Barclays’ UK banking chief Matt Hammerstein to chair its practitioner panel and Ascential finance chief Mandy Gradden to chair its listing advisory panel.

• The Ontario Municipal Employees Retirement System, one of Canada’s largest pension funds, has named Michael Hill as global head of infrastructure. He will join in September from the Canada Pension Plan Investment Board.

• Citigroup dealmaker Marina Kvasnikova has joined DC Advisory’s technology and software investment banking team in London.

• Johnny Boufarhat, the founder of British virtual events start-up Hopin, will step down as CEO after the one-time pandemic sensation struggled to adjust when physical gatherings returned.

• Rolls-Royce will appoint former Embraer CEO Paulo Cesar de Souza e Silva as a non-executive director, effective September 1.

Smart reads

Rouble arbitrage Wall Street chiefs were eager to boast big trading gains last year. But one part was often left out: a billion-dollar windfall from Russia that was siphoned through former Soviet republics, Bloomberg reports.

Above the law Crypto trading became illegal in China in 2021. Almost two years later, users traded $90bn of digital currencies there in a single month, a Wall Street Journal investigation shows.

Greener pastures? Ex-Citigroup private banking boss Peter Charrington took up a new gig late last year at a firm backed by Joe Lewis, the British billionaire now at the centre of a US insider-trading probe, Bloomberg reports.

And one smart listen: The fundraising of new California women’s football club Bay FC underscores private capital’s growing status in US sport. Hear more on the FT’s Behind the Money podcast.

News round-up

GAM makes last-ditch effort to win support for Liontrust rescue deal (FT)

UK regulator probes Cameco, Brookfield Renewable’s $7.9bn Westinghouse deal (Reuters)

Bain, Cinven weighs sale of €10bn drugmaker Stada (Bloomberg)

India’s fantasy sports sector fears new tax will kill real-money games (FT)

European IPOs fall to lowest level since 2009 (FT)

Coca-Cola bottler CCEP intends to acquire Coke’s Philippines business for $1.8bn (Reuters)

Arm/SoftBank: chip sector multiple would mean $32bn IPO valuation (Lex)

Michael Klein: Spac sponsor backs English compounder (Lex)