EY cancels ‘Project Everest’ after months of wrangling
The ‘big four’ firm had wanted to separate tax services between two new audit and consulting businesses, but its global leadership still thinks a split might be necessary.
EY has cancelled ‘Project Everest’ due to opposition from the US executive committee, reported the Financial Times yesterday, April 11.
The global leadership told partners in an internal note that the project had been cancelled, suggesting the group would pursue a different deal. Project Everest would have separated EY’s audit and consulting functions with tax services divided between the two new businesses.
“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,” the global leadership told partners in the internal note.
“We acknowledge the challenges with separating some of our businesses that have the deepest technical expertise in a way that gives both organisations the capabilities they need to compete in the market effectively,” they explained.
However, the debate about the future of accounting is not over, especially for auditors and tax professionals. A separation of services is one way to try to prevent conflicts of interest between audits and tax advice.
EY’s global leadership told partners: “We also recognise that we need more time to make the necessary investments to prepare the businesses for a separation.”
The firm’s global leadership decided to go ahead with Project Everest in September 2022, though the early work had already begun in November 2021.
EY originally planned to sell about 15% of the consulting business for more than $10 billion, with another 15% being reserved for staff equity incentives, leaving 70% for partners. Consulting would have dropped the partnership model and become a public company under the plan.
A new consulting company, called NewCo, would have gained 60% of EY’s projected revenue of $42 billion in 2023. The audit arm, named AssureCo, would have taken the remaining 40%. But this division became a focus of intense negotiation in the firm.
The future of tax services was a fundamental question for Project Everest. Auditors stood to gain just 14% of tax services, but US auditors argued for a greater share of up to 20% or 25%. Meanwhile, US consultants had their own arguments for why they should walk away with most of the tax offering.
Yesterday’s announcement was not entirely unexpected – in March, after months of negotiation, EY hit ‘pause’ on the project amid reports of infighting over the details of the separation.