Firms, analysts, journalists, clients, and, of course, EY’s partners themselves have been grappling with the numerous questions it raised: How difficult would the processes of disentangling the firms and, presumably, listing the new consulting firm via an IPO be? Where would the line be drawn between core audit services and audit-adjacent services, like tax advisory, that could sit with either spin-off firm? What would be the cost of demarcating two separate practices, separating or duplicating previously integrated systems and processes? 

In the last few days, however, we’ve learned that these questions will, for now at least, be left unanswered. That’s because Project Everest, as it came to be known, has been scrapped following objections from leadership in the US, EY’s largest member firm.

We’ve written before on this blog about the kind of impact splitting a Big Four firm like EY might have on the wider market. But speculating about the impact of it not going ahead is an entirely different undertaking. That’s partly because the details around the scrapping of Project Everest remain somewhat hazy—no doubt more will emerge in the coming weeks; but it’s also simply the case that nothing like this has ever happened—or, indeed, not happened—before.  

That being said, there are some things we can say with relative confidence about the decision not to go ahead with the split that those following the story should be keeping in mind. 

It’s not yet clear to what extent the split is being scrapped, or simply delayed and rethought 

EY’s messaging at the moment is leaving the door open for a potential future split of some kind. In an update, the firm declared that they are unable to proceed with the Project Everest proposal “in its current form”, but that they “remain committed to that vision and those goals” that formed the justification for the split.  

Of course, it’s difficult to know the extent to which this should be taken at face value, but the fact that EY aren’t completely shutting down the possibility of some sort of reshuffle indicates that this story is potentially far from over. 

All that work won’t necessarily be wasted

In the last year, and undoubtedly before that, EY will have invested substantial time, money, and effort into developing a strategic vision for the split. While much of the logistical preparation will, for now at least, not be needed, a lot of the thinking around the nuts and bolts of branding—positioning, design decisions, even things like colour schemes and logos—could still be put to good use. Given the need to split back-office functions if Project Everest had gone ahead, the firm is also likely to have thought deeply about the sort of support staff both audit and advisory really need, and where there could be efficiency savings. 

In some ways, the fact that EY have spent time thinking deeply about their value proposition puts them at an advantage compared to other firms who have spent the last year carrying on as normal. The question, then, is whether that is indeed what other firms have been doing, or whether the impending EY split forced them to think similarly about their offering behind closed doors. 

For clients, in effect, nothing has changed

It might be tempting to presume the decision not to split will be harmful when it comes to client perception, but this is not obviously the case. Research we conducted at the beginning of this year did, admittedly, indicate that a slim majority of clients would be more likely to use both separate EY audit and advisory firms (see figure 1), but this is not the complete picture.

That’s because, when we ask clients if they would prefer that the consulting firms they work with also have audit arms (as will continue to be the case for EY), only a quarter said they would prefer them not to (see figure 2).

In other words, while in the case of EY specifically clients may have been slightly tending towards preferring a split (or at least, expecting that the removal of conflicts of interest would mean they would be more likely to work with both separate arms of EY), when considering partners in general, only 26% are in favour of separate audit and advisory services. A full 50% percent said they would prefer their consulting firm to have an audit arm, whilst the remaining quarter said it either makes no difference or depends upon the circumstances. 

Clients’ minds are far from made up on this issue, then. EY’s decision not to split may lose them a bit of credibility in the short-term, especially with regards to projects where clients are using EY to support structural changes internally (if EY are seen as incapable of managing an internal restructuring, clients may err on the side of caution when it comes to procuring similar work from them). However, that loss of face may be less problematic than the fallout if the firm had continued to force through a split despite senior opposition to the move. 

The reality for most clients is that, frankly, nothing has changed—if you liked EY before, there’s no technical reason to change your tune. It just remains to be seen whether EY’s tune will change again in future.