Some partners had resistance to the split of consulting and audit businessesEY has scrapped plans to break up its audit and consulting businesses after months of internal disagreement and opposition from executives in the US.
Project Everest, the Big Four’s plan to transform the accounting industry, was codenamed Project Everest.
EY’s global leadership team of 18 people approved the plan in September. Partners received a note Tuesday saying that the firm would pursue a new deal.
“We were informed by the US executive committee that they have decided not to proceed with Project Everest design. “Due to the strategic importance of Project Everest for the US member company, we have stopped work on this project,” they wrote in a note.
The global executive team stated that they were still committed to “creating 2 world-class organizations that further advance audit quality and independence, as well as client choice”.
EY is a global network made up of member firms. Any split would need to be approved country-by-country.
Carmine Di Sibio, global chief executive, championed Project Everest as a way for both sides to be free from conflict-of interest rules that prevent accountants from selling many of their services. The stock market would have allowed the independent consulting and tax advisory firms to be floated.
The break-up plan would have allowed consultants to receive shares in the new company worth up to nine times their annual salaries, while audit partners would have received cash windfalls up to four times their annual earnings.
The US firm ‘s leaders were not convinced that EY’s tax business should be cut down and that the remaining audit-focused company would be financially sound enough to continue audit quality. Julie Boland, the US firm’s chief executive, called a ” Pause” to plan work.
In 2021, the split was first proposed internally. This was during a period of unprecedented growth for consulting companies due to a surge in IT projects in the wake of the pandemic. EY’s financial projections were complicated by the fact that consulting company valuations have plummeted and that debt costs have risen.
The global executive committee stated that Project Everest was a difficult journey. “[We] will start taking actions based upon what we have learned over the past year — actions which will benefit our businesses and better prepare us to do a new transaction.”
EY spent hundreds of millions on Project Everest with over 2,000 employees involved in its planning. Its collapse raises questions about Di Sibio’s future. He was expected to continue the consulting business following the split, and he was allowed to remain as EY’s chief Executive in the interim, even though he had reached the normal retirement age of sixty.
The global executive committee’s commitment that they would pursue any future transaction, Tuesday’s announcement does not remove uncertainty about the firm’s future strategy. Last year, Di Sibio stated that private equity firms were interested in buying parts of the business.