In 2022 and 2023, Ernst & Young pursued the most ambitious restructuring attempt in modern Big Four history: a plan, code-named Project Everest, to separate most of its consulting business from its audit and assurance business. The logic was straightforward. Audit independence rules constrained cross-selling and limited growth in advisory. A split promised to unlock faster growth in consulting, reduce regulatory conflicts, and potentially create billions in value through a public listing of the consulting business. EY leaders also argued that two more focused organizations would better serve clients and talent in a changing market. (Reuters)
Yet the plan collapsed in April 2023 after more than a year of work, heavy internal conflict, and very substantial expense. Reporting from the Financial Times and The Wall Street Journal indicates that the project consumed roughly $600 million and involved tens of thousands of hours of partner and staff effort. EY’s own reporting later acknowledged that Everest did not proceed, while maintaining that it triggered useful internal reflection and innovation discussions. (The Wall Street Journal)
The proximate cause of failure was resistance inside EY’s U.S. member firm, especially around the treatment of tax, the economics of the deal, protection of the audit business, and the risks of separating integrated capabilities. But the deeper reasons were structural: partner incentives favored short-term economics over long-term redesign; the federalized partnership model made global alignment difficult; the proposed transaction was operationally complex; and the split asked too many constituencies to accept uncertain sacrifices in exchange for uneven and delayed benefits. (Reuters)
Project Everest matters beyond EY. It exposed the strategic contradictions at the heart of the Big Four model: audit independence limits growth, consulting needs freedom, tax sits awkwardly between the two, and partner-governed global networks struggle to execute radical change. The failed split is therefore not just an EY story. It is a case study in why incumbent professional services firms often recognize the need for transformation but still fail to deliver it. (Financial Times)
Background
EY operates as a global network of member firms rather than as a single unified corporation. Like the other Big Four firms, it combines audit, tax, and advisory capabilities in a multidisciplinary model. That model has scale and client advantages, but it also creates a recurring strategic problem: regulators require auditor independence, which restricts the kinds of consulting services an auditor can sell to audit clients. In practice, the faster the consulting market grows, the more painful those restrictions become. (Financial Times)
The pressure on the model had been building for years. Consulting was attractive because it offered faster growth and, in many areas, stronger economics than audit. At the same time, audit firms faced ongoing scrutiny over independence, quality, and conflicts of interest. EY was also dealing with reputational damage from the SEC’s 2022 enforcement action, in which Ernst & Young LLP agreed to pay a $100 million penalty related to cheating by audit professionals on CPA ethics exams and misleading the SEC’s investigation. Although that matter was separate from Everest, it reinforced the broader environment of regulatory pressure and trust concerns around the firm. (SEC)
Against that backdrop, EY developed Project Everest. The proposal was to spin off most of the advisory business into a separate company while retaining audit, assurance, and a portion of tax in a remaining partnership structure. According to reporting, the consulting entity would raise substantial debt and equity financing, and a portion of the proceeds would be used to compensate audit partners who would remain behind in the slower-growing audit-focused business. Financial reporting suggested an overall financing plan of roughly $30 billion, including an IPO component and significant borrowing. (The Wall Street Journal)
The strategic story was appealing on paper. The consulting business would gain freedom from audit independence rules, enabling broader service offerings and more aggressive growth. The audit business would become more focused and potentially more credible with regulators. EY leadership pitched the transaction as a bold response to industry change and an opportunity to create long-term value for clients, people, and partners. EY later described Everest in its own reporting as a “bold plan” intended to transform the organization. (EY)
The intended transaction logic
The core logic of Everest rested on four arguments.
First, a separation would allow the consulting business to grow without the constraints created by auditor independence rules. Under the integrated Big Four model, many high-value advisory opportunities cannot be pursued if the client is also an audit client. The split would remove that barrier for the spun-off business. (Financial Times)
Second, the transaction was designed to unlock economic value. Press reporting indicated that the consulting arm would raise around $30 billion through a combination of an IPO and debt, which would fund separation costs, settle liabilities, and provide large payouts to audit partners. The prospect of substantial partner windfalls was not incidental; it was one of the mechanisms for making the deal politically viable inside the partnership. (The Wall Street Journal)
Third, EY leadership framed the split as a response to client and talent trends. Consulting clients increasingly wanted broader transformation services, while talent in advisory businesses often preferred the speed, incentives, and equity-style upside associated with more independent growth platforms. EY’s own later language about Everest stressed the ambition to create “long-term value” and to rethink the firm’s future model. (EY)
Fourth, the split would theoretically reduce structural tensions between the audit and consulting businesses. This was especially attractive after years of political and regulatory debate over whether multidisciplinary professional services firms can balance independence, quality, growth, and commercial incentives in one organization. (Financial Times)
Timeline of Events
2022: launch and internal mobilization
EY publicly moved toward the split in 2022. During this period, the firm developed the transaction design, worked through the division of businesses, and began selling the concept internally to partners. External reporting later described the plan as the biggest potential shake-up in the accounting sector since the collapse of Arthur Andersen in 2002. (Reuters)
At this stage, the combination of strategic logic and proposed payouts gave Everest momentum. The idea promised to solve a long-standing industry problem while giving many partners a tangible near-term economic benefit. But the plan was already carrying hidden complexity: how to divide tax, how to allocate debt, how to structure partner compensation, how to protect audit quality, and how to maintain service capability across geographies and practices. (Financial Times)
Early 2023: resistance becomes visible
By March 2023, serious cracks were public. The Financial Times reported that the project had been “paused” amid internal infighting over how much of the tax business should stay with the audit side. Reuters also reported that the split had become entangled with litigation concerns, including the NMC Health lawsuit in London, where claimants argued that a reorganization could affect EY’s ability to satisfy a potential judgment. (Financial Times)
The tax issue was especially explosive. Tax did not fit neatly on either side. Some tax work was closely linked to audit and needed to remain with the audit business to preserve service capability. Other tax work had stronger synergies with consulting and transaction services. The U.S. firm, which held enormous influence within the EY network, reportedly pushed for a larger share of tax to remain with the audit side than had been contemplated globally. The FT reported that the proposal had been for tax to make up about 30% of the U.S. audit-side business versus 14% globally, highlighting how different the U.S. economics were from the global average. (Financial Times)
At the same time, partners increasingly questioned whether the consulting business would emerge too burdened by debt and whether the audit business would be weakened by losing too much growth capacity. The FT reported that EY’s U.S. boss Julie Boland raised concerns about protecting the audit business and profit targets for consulting. (Financial Times)
April 2023: collapse
On April 12, 2023, Reuters reported that EY had called off the plan after the U.S. Executive Committee decided not to move forward. That decision effectively killed Everest, because no restructuring of this scale could proceed without support from the U.S. member firm. Reuters described it as the end of the most significant proposed overhaul in the sector in decades. (Reuters)
Subsequent reporting from the FT and WSJ put the cost of the failed effort at about $600 million and described internal fallout, cost-cutting, and leadership strain. The FT reported that UK partners were told global costs had reached that level, and the WSJ reported a similar figure. (Financial Times)
What Went Wrong?
Misaligned incentives inside the partnership
The most important reason Everest failed was that the stakeholders who had to approve it did not win in the same way or on the same timeline.
Some partners, especially in consulting, could see a strong upside in a freer, higher-growth business. But many audit-side partners were being asked to give up future integration benefits in exchange for compensation today and a more uncertain future tomorrow. U.S. leaders also had to think about the ongoing economics and capabilities of the remaining audit-focused firm, not just the transaction headline. Once those partners believed the audit-side business could be weakened or under-equipped, support eroded. (Financial Times)
This was compounded by the fact that the proposed partner payouts became politically double-edged. They helped sell the deal initially, but they also made the plan look like a highly engineered financial transaction rather than a clean strategic redesign. When confidence in the post-split economics wobbled, the payouts no longer solved the underlying trust problem. (The Wall Street Journal)
Tax was structurally hard to separate
The tax dispute was not a side issue. It was a signal that the multidisciplinary model was more integrated than the strategy deck suggested.
Tax sits across audit, transactions, structuring, compliance, and advisory. Pulling it apart affects client relationships, revenue pools, career paths, and regulatory positioning. The disagreement over how much tax should remain with audit was effectively a disagreement about the viability of both future businesses. The U.S. view appears to have been especially important because of the sheer scale of the American operation. (Financial Times)
When firms say they will “separate consulting from audit,” the reality is usually messier. Everest demonstrated that some businesses, especially tax, do not map cleanly into binary categories.
The global network model made decisive execution difficult
EY is not a single company. It is a global network of member firms with local power centers. That creates flexibility in normal operations, but it is a serious handicap when attempting radical, synchronized restructuring.
A transaction of this magnitude required alignment across geographies, practices, and partner groups. It also required the U.S. member firm to buy into a design that may not have served U.S. economics as well as it served the global narrative. Once the U.S. executive committee withdrew support, the effort was effectively over. (Reuters)
This is a broader lesson for Big Four governance: global strategy is often weaker than national partner economics.
The deal was financially and operationally too complex
WSJ and FT reporting described a large financing package, including about $11.5 billion from an IPO and $18.5 billion of borrowing for the consulting entity. Later FT reporting also said EY had taken on more than $700 million in extra debt on its global operating business to deal with the costs of the failed plan. Even if the strategic logic was sound, the transaction mechanics were hard to explain and harder to de-risk for skeptical insiders. (The Wall Street Journal)
When a transaction becomes too financially engineered, partner confidence can break down fast. People stop arguing about vision and start arguing about exposure, liability, cash flow, stranded costs, and what happens if market conditions turn.
Litigation and regulatory overhang increased perceived risk
Reuters reported that the NMC Health litigation in London complicated the context for the split because plaintiffs raised concerns over collectability if EY reorganized. Even if this was not the decisive factor, it added another layer of uncertainty around timing, liability, and optics. (Reuters)
More broadly, EY was attempting a bold structural move in the shadow of ongoing regulatory scrutiny of audit firms. The SEC’s 2022 cheating case had already damaged trust and reminded stakeholders that audit quality, ethics, and regulatory credibility were not abstract issues. (SEC)
Leadership underestimated political resistance
Public reporting after the collapse pointed to significant miscalculations, surprise, and leadership tension. The FT described “frustration and chaos” and later referred to an internal “civil war.” It also reported that EY hired external advice to examine the failed process. (Financial Times)
Retired partners and pension obligations became part of the internal resistance to Project Everest. The Wall Street Journal reported that the split had already been delayed by disputes over how to handle unfunded pension obligations to retired U.S. partners, while the Financial Times reported that more than 150 retired EY partners objected to the plan on the grounds that it could weaken both sides of the firm. This dimension matters because it shows that Everest was not only a strategic and regulatory restructuring. It was also a redistribution of future economic security inside the partnership. Once the deal was seen through that lens, resistance became much harder to overcome. (Wall Street Journal)
The leadership mistake was underestimating the degree to which radical change inside a partnership is a political campaign, not just a transaction design exercise. The harder the economic and governance questions became, the more the process depended on coalition management and internal trust. That is where Everest broke down.
The cost of failure
The collapse of Project Everest imposed at least four categories of cost on EY.
First, there was the direct financial cost. Multiple major outlets reported that the project consumed around $600 million, and the FT later reported that EY had added more than $700 million in debt to its global operating business in connection with the failed effort. (The Wall Street Journal)
Second, there was an organizational opportunity cost. Tens of thousands of hours went into planning, debate, design, and advocacy rather than client work, talent development, or targeted operational improvement. FT reporting described subsequent cost-cutting in the UK and U.S. after the collapse. (Financial Times)
Third, there was leadership and cultural damage. A failed effort of this scale weakens confidence in senior leadership, exposes internal divisions, and can increase attrition risk. The WSJ reported concerns about staff poaching after the split failed. (The Wall Street Journal)
Fourth, there was strategic damage. Everest was meant to resolve a structural problem. Its failure left EY still facing the same core contradiction: how to grow advisory businesses while remaining constrained by independence rules and partnership politics.
Lessons Learned
In professional services, incentives beat strategy
Everest had a coherent strategic rationale. That was not enough. The plan failed because the people with veto power did not see a sufficiently attractive or sufficiently safe outcome for themselves and their businesses. In partnership structures, transformation succeeds only when the coalition behind the change is stronger than the coalition protecting the status quo. (Reuters)
Multidisciplinary firms are more integrated than leaders admit
Tax was the smoking gun. It showed that “audit versus consulting” is too simplistic. Real client work, economics, and talent models are intertwined. The more integrated the firm, the harder a clean split becomes. (Financial Times)
Federal partnership structures are poor vehicles for radical redesign
Big Four firms often market themselves globally, but they govern themselves locally. That makes them formidable operating networks and weak vehicles for bold, centralized transformation. The U.S. veto over Everest made that brutally clear. (Reuters)
Financial engineering cannot substitute for operating conviction
Large payouts and complex financing can create initial momentum, but they do not resolve concern about future business viability. When the underlying operating model feels uncertain, the transaction math stops persuading people. (The Wall Street Journal)
The Big Four transformation problem remains unsolved
Everest failed, but the forces that produced it did not disappear. Independence rules still constrain growth. Audit still faces credibility and quality pressures. Consulting still seeks freedom and scale. AI is now putting even more stress on the traditional professional services model by compressing labor-based revenue logic. Everest was an early, dramatic attempt to respond. It failed, but the underlying problem is getting worse, not better. (Financial Times)
Why this case still matters
The failed EY split is a live strategic case because it captures a broader pattern seen in large incumbent firms.
Organizations often recognize the external need for transformation before they are capable of executing internal transformation. They can see the market shift, design a bold answer, and still fail because governance, incentives, and economics are misaligned. That is exactly what happened here. Everest was not killed by lack of intelligence. It was killed by structural contradiction.
For boards, partners, and leaders in professional services firms, this is the important takeaway: the biggest barrier to reinvention is usually not technology, competition, or regulation alone. It is the internal distribution of power, economics, and risk.
Closing thoughts
Project Everest was one of the most ambitious transformation attempts ever launched by a Big Four firm. It tried to solve a real strategic problem with a bold structural answer. It failed not because the problem was imaginary, but because the solution collided with the internal realities of a global partnership: misaligned incentives, disputed economics, governance fragmentation, and deep uncertainty over who would bear the downside.
That is why the failed EY split is such a useful case study. It shows, in very concrete form, that professional services firms do not just struggle with market change. They struggle with the internal redesign required to respond to market change.
EY could not split because the firm could not agree on what future it was willing to pay for.
What This Means for Boards
For boards, the EY split case demonstrates how difficult large-scale transformation becomes once governance, economics, regulation, technology, and partner incentives all need to change simultaneously.
Project Everest was not simply a restructuring exercise. It was an attempt to redesign the operating logic of one of the world’s largest professional-services organizations while the firm continued operating at global scale. That meant the transformation depended not only on strategic clarity, but also on maintaining alignment across partner economics, tax implications, regulatory considerations, capital markets expectations, technology separation, client relationships, and internal political support at the same time.
The central lesson is that large transformations inside professional-services firms rarely fail because the strategic rationale is obviously irrational. More often, they struggle because too many underlying systems must remain aligned simultaneously for execution to remain viable. The greater the scale of the transformation, the more sensitive the program becomes to changing assumptions, uneven incentives, governance fragmentation, and internal economic asymmetries across the organization.
The EY split also highlights a broader governance challenge that many boards underestimate. In highly decentralized organizations, formal authority does not necessarily translate into execution capability. Leadership may articulate a coherent strategic direction, yet still lack the practical ability to align the economic interests, political priorities, and operational realities required to deliver it. In that environment, transformation becomes less a question of strategy design and more a question of whether the organisation can sustain alignment long enough to execute structural change at all.
Importantly, the case also illustrates how difficult it becomes to separate businesses once technology platforms, delivery models, client relationships, data environments, talent structures, and economics have become deeply interconnected over time. What appears strategically separable at board level may prove operationally intertwined in practice.
For boards of professional-services firms, the key question is therefore not only whether a transformation strategy is strategically compelling. It is whether the organisation realistically possesses the governance coherence, economic alignment, operational visibility, and execution capacity required to sustain the transformation once conditions become politically and operationally difficult.
Because in large professional-services transformations, the greatest risks often emerge not at the beginning of the program, but later, once the organisation has already committed publicly, economically, and operationally to a direction that becomes progressively harder to reverse.
I work with boards and executive teams on independent perspectives across large transformation programs, governance, operating models, platform economics, and strategic execution risk inside professional-services firms. If your leadership team is working through similar transformation dynamics or governance questions, feel free to reach out.
Sources
Primary / official sources
- EY, Value Realized 2023: reporting progress on global impact — EY’s own description of Project Everest as a “bold plan” and later acknowledgement that it did not proceed. (EY)
- U.S. SEC, Ernst & Young to Pay $100 Million Penalty for Employees Cheating on CPA Ethics Exams and Misleading Investigation (June 28, 2022). (SEC)
- U.S. SEC administrative order, In the Matter of Ernst & Young LLP (June 28, 2022), for the factual record behind the SEC action. (SEC)
- EY Netherlands, Annual Review 2022/2023 — retrospective reference to Project Everest and its termination. (EY)
- EY Netherlands, Transparency Report 2023 — notes that Project Everest was terminated and lessons were considered. (EY)
- EY Netherlands, Annual Review 2023/2024 — retrospective reference to Everest as part of transformation discussions. (EY)
- EY Norway, Transparency Report 2023 — refers to EY having stopped work on Project Everest. (EY)
Secondary / reporting sources
- Reuters, EY calls off plan to split audit, consulting units (April 12, 2023). (Reuters)
- Reuters, EY’s ‘paused’ split dragged into $2.7 bln London lawsuit (March 20, 2023). (Reuters)
- Financial Times, To split or not to split: EY confronts the question (March 5, 2023). (Financial Times)
- Financial Times, EY split paused amid partner infighting over fate of tax business (March 8, 2023). (Financial Times)
- Financial Times, ‘Frustration and chaos’: EY fights to save Project Everest (March 10, 2023). (Financial Times)
- Financial Times, EY US boss signalled wide-ranging concerns over split (March 13, 2023). (Financial Times)
- Financial Times, EY: Breaking up is hard to do (April 11, 2023). (Financial Times)
- Financial Times, Julie Boland: the EY leader in the middle of a ‘civil war’ (April 14, 2023). (Financial Times)
- Financial Times, EY UK warned to expect staff exits and cost cuts after Project Everest collapse (April 12, 2023). (Financial Times)
- Financial Times, EY’s US firm to embark on $500mn cost savings after scuppering break-up plan (April 12, 2023). (Financial Times)
- Financial Times, EY hires corporate crisis adviser to examine failed break-up plan (July 22, 2023). (Financial Times)
- Financial Times, EY took on $700mn in debt for doomed ‘Project Everest’ spin-off plan (February 11, 2024). (Financial Times)
- Wall Street Journal, EY’s Breakup Plan Means Windfalls for Partners (June 20, 2022). (The Wall Street Journal)
- Wall Street Journal, EY Breakup Plan Stalled on Partners Split (March 16, 2023). (The Wall Street Journal)
- Wall Street Journal, EY Breakup Plan Doomed by Miscalculations and Powerful Opponents (April 12, 2023). (The Wall Street Journal)
- Wall Street Journal, Ernst & Young, After Its Failed Split, Could Find Itself Vulnerable to Staff Poaching (April 19, 2023). (The Wall Street Journal)