Listen: My Noa Series for May

In 2022, the Big Four accounting giant Ernst & Young unveiled a bold plan to separate its consulting and accountancy arms. However, one year later, the plan unraveled as EY’s 13,000 partners failed to reach a mutually acceptable agreement. Find out why in this insightful series.

This month I worked with the Noa (News Over Audio) editorial team to curate this interesting Series that I feel you will enjoy.

Each year, hundreds of climbers attempt to scale Mount Everest, but only about two-thirds reach the summit. The arduous nature of the climb may explain why the leaders of EY codenamed the company’s break-up as “Project Everest”.

EY is a multidisciplinary professional services firm, which provides both auditing and consulting services. However, this dual role has raised concerns of conflict of interest as providing consulting services to clients while also auditing their financial statements could compromise the objectivity and independence of the audit process.

To address this issue, EY’s top executives decided in May 2022 to split the consulting arm and audit business into independent entities. The goal was to end the conflicts of interest issue, increase profitability and enhance audit quality.

However, splitting a $45 billion firm is easier said than done.

Like many professional services businesses, EY is owned and controlled by its partners. This meant the split could not be forced through by a small executive team, it needed consensus from around 13,000 partners.

In addition, the two units being split up were not equals. Consulting is the higher revenue, higher profit division – and both businesses were fighting to take the highly lucrative tax advisory arm.

Ultimately, in April 2023, EY abandoned the plan. They failed in their quest to conquer Everest.

In this Noa Series, we will explore EY’s failed breakup in depth. We’ll start by looking at how EY’s partnership structure scuppered the deal and examine why the unevenness of the two business units created an impasse. We’ll finish by considering whether the break up might just be postponed rather than abandoned.

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