EY Oceania staff to hear why the audit and consulting split is no longer going ahead

EY Oceania staff will meet in days to discuss the shelving of plans to separate its audit and consulting arms.

EY Oceania staff will discuss the termination of plans to separate the company’s audit and consulting arms. Picture: Chris Pavlich

The Australian arm of global professional services firm Ernst & Young will meet on Monday to discuss the decision to abandon plans to split the consulting and auditing arms of the business.

EY Oceania declined to reveal the nature of Monday’s planned discussions, but company insiders expect management to lay out its reasons for why the global leadership has suspended the split.

The plan, dubbed project Everest, would have resulted in disparate global branches splitting their operations and listing on the market, allowing equity holders to cash out.

EY would have raised $US11bn through a float of 15 per cent of the consulting business, while a further $18bn would be borrowed from capital markets.

Auditing partners would have been handed cash in the deal, while consulting partners would take up equity in the newly listed business.

But EY management moved on Tuesday, US time, to stop all work on the plan “after much diligence” – a move some within the business had expected for some time as the vote to approve the scheme was last year delayed.

The vote would have given the company’s almost 13,000 partners a vote whether to split it in two.

EY Oceania managing partner David Larocca has spent recent months reassuring staff the decision would go ahead, but declined to comment on Thursday.

Its failure has been attributed to a dispute between EY’s US audit partners over how the company would divide the lucrative tax business between the new audit and consulting businesses.

EY had spent almost $US100m on scoping the plan, with teams across the business’ different global arms working on preparing for the split.

Questions have been raised about how EY will unspool the resourcing of the different teams within the business, as some have spent months working on the potential split.

Several professional services companies have moved to cut their own headcount; strategy consulting company McKinsey has announced it would shed 3 per cent.

In a statement on Tuesday, EY’s global leadership said the company would “be taking actions based on what we have learned from the work done over the past year”.

It said these “actions” would benefit “our business today and better prepare us for a new transaction”.

“In the immediate term, we will continue to focus on EY clients, people and businesses – providing exceptional client service and driving long-term value for all our stakeholders,” EY said in a statement.

“In particular, we will remain laser focused in continuing to build a business that creates greater opportunities for all of you, grounded in our shared values that have helped us create the unique and strong culture on which we pride ourselves.”