Ernst & Young is pausing its plans to spin off the consulting side of the global network as a separate publicly traded company as it works to appease warring partner factions.
EY US chair and managing partner Julie Boland reportedly told her fellow partners during a call Wednesday that the Big Four firm is reworking the deal, according to the Financial Times. Among the concerns that have emerged is where the tax practice will go, whether entirely with the consulting side of the firm or if some of it will be retained by the auditing side of the firm.
Votes on the plan among EY’s approximately 13,000 partners around the world have been postponed several times, and some of EY’s member firms in China and Israel have reportedly rejected the split.
Boland reportedly still wants to move forward with the deal, but the details appear to be in disarray. Retired partners have raised concerns about how the proposed split could affect their pensions, according to The Wall Street Journal, and EY has reportedly agreed to set up a committee to represent them and pay for legal counsel for them.
EY global chair and CEO Carmine Di Sibio proposed the split last May and succeeded in getting approval among the firm’s senior leaders last September for what has been dubbed Project Everest. But concerns quickly emerged over compensation terms for partners, and a vote by the partnership and member firms at large has been delayed. It was expected to happen in April or May, but now it may not happen until the end of the year.
Di Sibio reportedly told the staff in a memo Thursday that the firm would spend the next few weeks trying to resolve the issues, according to the FT.
Accounting Today reached out to EY for comment and received a statement: “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 roadmap for the re-shaping 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.”
Legal and regulatory compliance considerations also appear to be playing a role in delaying the split, as well as monetary compensation for the partners being moved to a less profitable part of the firm. The uncertain IPO market is probably also a factor during a time of economic uncertainty and a possible recession.
Legal experts are keenly interested in the developments.
“I think that we are watching an incredibly complicated transaction,” said Mathieu Shapiro, managing partner and member of the litigation department of Philadelphia-based law firm Obermayer. “The regulatory, compliance and legal issues of splitting up 13,000 partners operating in  different countries have to be incredibly overwhelming. When you have that many component pieces of the company that you are trying to break up, you have to come up with an organizational structure in which nobody perceives winners and losers. You’ve got all kinds of interacting obligations to each other and to the different component pieces, which just create an enormous amount of complexity.”