EY has decided to stop its plan to split the firm into separate auditing and consulting businesses called Project Everest, as the US executive committee has decided not to move forward with the plan. This decision was reported by the Financial Times, who said they had seen a memo signed by EY’s global executive committee and circulated to the firm’s partners. The plan aimed to free the firm’s consultants from regulatory constraints around servicing current EY audit clients, and auditors would have been able to pitch for work from clients that currently use EY consultants.
According to Fiona Czerniawska, chief executive of Source Global Research, a consulting sector analyst, the clients were still looking for different delivery models, and EY’s specific constraint remains urgent to resolve. The company generated $US45 billion in revenue last financial year. The internal memo said, “the global executive remains committed to moving forward with creating two world-class organizations that further advance audit quality, independence and client choice”.
EY was facing difficulties in resolving differences over how to staff the audit practice and how to divide the tax practice. The impasse pitted Julie Boland, chairwoman of EY US, and Carmine Di Sibio, who chairs EY’s global arm, against each other. Additionally, the logistics of divvying assets and legal liabilities plus shoring up pension payments added to the challenge of separating the $US45 billion operation scattered across 75 different jurisdictions. Originally, approximately 13,000 partners were expected to vote on the deal last autumn, but the timeline was pushed back several times.
While the plan did not come to fruition, analysts expect alternative, perhaps smaller scale options to be floated in the future, as the clients are still looking for different delivery models, and EY’s specific constraint remains an urgent issue to resolve. However, the promised millions of dollars in one-term payouts and the chance for an equity stake in any IPO for the partners are now off the table.
