Dive Brief:

• Ernst & Young, one of the Big Four accounting giants, has halted its plan to split its auditing and consulting businesses into two separate entities, a plan known as “Project Everest,” after the company’s U.S. executive committee, the biggest arm of the global network, decided to not move forward with the division.
• The stop comes less than a year after EY announced in September that partners would vote on the plan to separate into two distinct, multidisciplinary organizations — under the temporary names of NewCo and AssureCo — and said they expected voting to conclude in early 2023, according to a company statement. 
• The deal, which cost EY more than $100 million, has come apart after pushback from U.S. audit leaders who said the consulting business was getting most of the company’s tax business, according to a Wall Street Journal report. 

Dive Insight:

The deal could still be revived. 

In a letter to EY partners announcing the pause, the firm’s global executive body, led by EY Global Chairman and CEO Carmine Di Sibio stated it “remains committed to moving forward with creating two world-class organizations that further advance audit quality, independence and client choice.”

An EY spokesperson sent an emailed copy of the undated letter to CFO Dive. EY declined to comment beyond the letter. 

The EY Global Executive is the most senior EY body and brings together EY leadership functions, services and geographies, according to the company’s website. 

Mathieu Shapiro, a Philadelphia-based managing partner at law firm Obermayer who specializes in commercial split transactions, told CFO Dive that he still expected the EY split to go through despite ongoing reports of the deal fizzling.

“I still expect them to get this done. They need to — that’s why they invested this much time, money, and effort in the first place,” he wrote to CFO Dive today.

“For whatever reason, this structure didn’t work. But that doesn’t mean they are quitting; it means they need to go back to the drawing board and come up with an entirely new structure,” wrote Shapiro.

EY had appeared to be positioning for the deal’s execution and lining up executives to oversee the newly separated entities. 

Di Sibio had previously been scheduled to retire in June, but was then granted a two-year extension to see the proposal through and was intended to lead the new consulting arm, the Wall Street Journal reported.

Meanwhile, back in January, the former CFO of Cargill, the Minnetonka, Minn.- based agribusiness giant, left her post to become the global CFO of the proposed new public entity of EY’s consulting arm, NewCo. 

Jamie Miller was set to prepare NewCo to “transition to a public company, and successfully complete the proposed transaction,” according to a company spokesperson. It is unclear whether or not her new role is in jeopardy in light of the axed planned. 

The intended split was originally an effort by the company to avoid conflicts of interest between corporate clients. Once separated from the accounting business, consulting operations could be more profitable being that they would be less restricted by regulatory pressures. 

Currently, EY can not provide both consulting and audit services to the same firm, but under the new plan a client could potentially be a customer of both successor entities. 

If seen through, the split would be the biggest overhaul in the accounting industry since the collapse of firm Arthur Anderson back in 2002.

Editor's note: Senior Editor Maura Webber Sadovi contributed to this story.