Ever since “Project Everest” was announced last year there have been delays, complaints, and constant reassurance from leadership that things are going forward as planned, depending on market conditions. Only a week ago Global Managing Partner Andy Baldwin told Bloomberg Radio that a few details needed to be hammered out — specifically how legal liability will be spread among partners and how to fund pensions — and that a partner vote was expected in April or May. Then yesterday FT reported the EY split was “paused amid partner infighting over fate of tax experts.” Let’s check that out quick:
During Wednesday’s partner call, [Julie] Boland expressed a desire to move forward with the split, said two of the people familiar with the matter, although it was unclear how long the pause may last.
But her comments are a clear indication of the tensions that have simmered during internal talks, which have effectively pitted two sides of the business against each other.
Reminder: Julie Boland, who has no experience in audit, was chosen as future head of assurance for the spun-off audit business.
The plan was for tax folks to make up about 14 percent of the audit business, though someone who knows what they’re talking about told FT that number was more likely to be 20 to 25 percent, possibly more in the U.S. where rules about offering tax advice to audit clients are a bit softer than other countries. Said FT, EY’s US auditors have been pushing for more of its overseas tax practices to be retained in the audit firm as well so that they can work for international subsidiaries of crucial US clients.
Not even a day after FT said there was trouble in paradise they followed up with another article to say EY is “in disarray as internal war over break-up plan bursts into open.” Geez. What now?
Global chair and chief executive Carmine Di Sibio sought to reassure staff on Thursday that the separation of the businesses would go ahead.
But current and former EY partners and staff said Di Sibio and other senior leaders who masterminded the break-up plan should leave if they cannot make it happen. There would be a leadership transition if it did not go ahead, a person familiar with EY’s plans said.
Boland’s intervention has sparked frustration among partners and staff over possible delays or the collapse of the deal, with some describing “chaos”, “low morale” and “infighting” at the firm in recent days, as the audit and advisory sides attempted to resolve their differences.
In a message to staff on Thursday morning, seen by the Financial Times, Di Sibio said the firm’s leaders would spend the “next few weeks” trying to resolve the impasse.
He added he had a “high degree of confidence” that the plan, known as “Project Everest” and designed to liberate the consulting business from conflict of interest rules that prevent accounting firms from advising audit clients, would go ahead.
Since yesterday’s partner call the emails have been flying. The message seems to be “don’t worry, we’ll figure this out and the split will happen.” The information FT is getting seems to contradict those assurances.
Can we safely assume that Julie Boland will be forced out? Worse, that the split is going off the rails and Project Everest should be renamed to Project Krakatoa? And what will happen to all those new hires who are allegedly excited about the split?
For months now even the most optimistic of EY leaders have gone on record to say even if the details get hammered out to the satisfaction of voting partners there is still the issue of market conditions that could delay the consulting IPO, a critical component of the split. Maybe that won’t be an issue.
Stay tuned. I’m sure there will be more drama in the days and weeks ahead.
Embarrassing. Please pull the plug and blame market conditions.
Umm is this a firm that is supposed to be able to handle divestitures? Asking for a friend
I’ve been at EY for 15 years, it’s turned into a joke and a shell of its former self in recent years with pet projects trying to check every ESG box possible. Now expenses and employees are cut due to the high costs of the split.
I was about to take a job last fall with EY based on, among other things, the “riches” that’d come my way with the IPO following Everest. Glad I didn’t take it.