The plan to split "Big Four" firm Ernst & Young (EY) has been “paused”.
According to a March 9 article in Financial Times, the plan was halted after disagreements were made as to how much of the firm’s tax business should remain with its audit side.
The US business accounts for about 40% of EY’s annual global revenue of US$45 billion.
EY, in May 2022, said that it was in the early stages of separating its audit and consulting businesses.
The split aimed to free EY’s consultants and a significant portion of its tax practice from the restrictions of independence regulations, which currently hinder them from providing advice to the company's audit clients.
The firm had also planned to spin off a large portion of its tax practice into a new group. The new group would also include its consulting and other advisory service lines.
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Under the existing plan, the tax portion of the firm was meant to account for about 14% of EY’s global audit business. The figure is now expected to increase to around 20% to 25%, according to Financial Times’ source.
The split would have been put to vote by the 13,000 partners in EY although votes on the plan were delayed “repeatedly” as there were disagreements over the details of the split.
According to the Financial Times' source, Julie Boland, the head of EY’s US business, had told partners on a call on March 8 that the deal needed to be “reworked”. Boland had been picked to run EY after it spins off its consulting arm.
“As part of our deliberation and due diligence in connection with the proposed transaction, we are engaging in a dialogue with the largest EY country member firms to determine the final shape of the transaction. This transaction is complex and will be the road map for the reshaping the profession, so it is important we get this right. We remain committed to the strategic rationale that underpins Project Everest and believe that a deal can and should be done,” says EY in a statement.