EY has “paused” its plan to split in two amid a fierce dispute over how much of its tax business should stay with the audit side of the firm.
Julie Boland, the head of EY’s US business, who has been picked to run EY after it spins off its consulting arm, told partners on a call on Wednesday that the deal needed to be reworked, according to people familiar with the matter.
The US business accounts for about 40 per cent of EY’s $45bn in annual global revenues, giving it strong negotiating power in internal talks over the split.
EY had planned to spin off the majority of its tax practice into a new group containing consulting and other advisory service lines, leaving only a minority of its tax experts in the audit-dominated firm after the separation.
However, auditors in the US have been campaigning for a larger portion of the tax practice to be retained within the audit arm after the split, people with knowledge of the matter said.
This was partly because US rules allow accounting firms to provide some tax advice to audit clients, one of the people said.
Boland also expressed a desire to move forward with the split, said two of the people familiar with the matter, but it was unclear how long the pause may last.
EY’s global leadership decided in September to pursue the spin-off and initial public offering of the consulting arm, in a deal it has dubbed “Project Everest”.
But votes by EY’s 13,000 partners have been delayed repeatedly while the firm tries to iron out disputes over the details of how the split should work. The most recent plan had been to hold votes in roughly 75 countries in late April or May.
Boland’s comments are the clearest indication of the tensions that have simmered during internal talks, which have effectively pitted two sides of the business against each other.
Her intervention will pile pressure on EY’s global chair and chief executive Carmine Di Sibio, who is expected to lead the standalone advisory business if the split goes ahead.
EY said in 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 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.”