EY has called off the plan to break up its audit and consulting businesses after months of internal disagreement and opposition from executives in the United States.
The Big Four firm communicated the decision on Tuesday in a note to partners, which was seen by the Financial Times.
The plan, code-named Project Everest, was approved by EY’s global leadership in September and would have represented the biggest shake-up in the accounting industry in more than two decades.
The note, signed by EY’s 18-person global executive committee, said it was committed to pursuing a different deal in the future.
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“The global executive remains committed to moving forward with creating two world-class organisations that further advance audit quality, independence and client choice,” they wrote.
“However, we have been informed that the US executive committee has decided not to move forward with the design of Project Everest. Given the strategic importance of the US member firm to Project Everest, we are stopping work on the project.”
EY operates as a global network of member firms. Everest needed to be approved on a country-by-country basis.
Project Everest was championed by global chief executive Carmine Di Sibio as a way to free both sides of the business from conflict-of-interest rules that prevent consultants selling many of their services to a firm’s audit clients. The independent consulting and tax advisory businesses would have been floated on the stock market.
But leaders of the US firm were unconvinced that cutting EY’s tax business down the middle was wise, and that the remaining audit-focused firm would be financially strong enough to maintain audit quality.
Julie Boland, who runs the US firm, threw the future of the project into doubt last month by calling a “pause” to planning work.
The split was first raised internally in 2021 when consulting businesses were experiencing historic growth on the back of a boom in corporate IT transformation projects as a result of the coronavirus pandemic. However, valuations have since tumbled and debt costs have risen, complicating the financial projections EY was using to plan Project Everest.
“We always knew Project Everest would be a challenging journey,” the global executive committee wrote. “[We] will begin taking actions based on what we have learned from the work done over the past year – actions that will both benefit our businesses today and better prepare us for a new transaction.” – Copyright The Financial Times Limited 2023
