Carmine Di Sibio was derided by some colleagues as a mere ‘gatekeeper’ when he was named EY global boss in 2019.

The Italian-born executive defied expectations by attempting a once-in-a-generation break from Big Four society. But after months of internal wrangling and delays, the collapse of the deal has thrown the company into further turmoil – and cast doubt on its legacy.

“I don’t think anyone knows what will happen next,” said a partner involved in the plan to spin off the firm’s audit and advisory businesses.

EY had trumpeted the split plan – codenamed Project Everest – as the “roadmap to reshape the profession”. Di Sibio even won a two-year extension to his term as global chairman and chief executive to seal the deal, despite reaching the mandatory retirement age of 60 last month.

Messages to partners and staff after the breakup was called off highlighted that executives still wanted to find a way to split up the company. But who will actually be in charge of a renewed effort is unclear with the future of Di Sibio and other top executives hanging in the balance.

Di Sibio was “unlikely” to carry out any other type of restructuring, a person familiar with the situation said. However, his supporters say the chief executive should stay on for at least a while to give the company some much-needed stability.

What went wrong?

Di Sibio bet he could win the support of EY’s 13,000 partners for a deal that would have freed his consultants from conflict-of-interest rules that prevent them from advising audit clients.

The company had announced in September that the plan of rupture would be submitted to the votes of the partners country by country, but it never went so far.

The fate of Project Everest was sealed over Easter weekend when the US company’s executive committee voted against it. The power of the American company is such – accounting for 40% of EY’s $45 billion in revenue last year – that continuing without it was not an option.

The proposed split, which included a public listing of the consultancy business, would have given audit partners cash payments of up to four times their annual earnings. The consulting partners would have received shares in the independent consulting business worth up to nine times their annual salary.

But despite the riches on offer, executives at the US firm torpedoed the case, which had been on hold since US boss Julie Boland angered her international colleagues by calling for a “pause” last month.

“Today’s world is different from when Project Everest was originally conceived,” the US executive committee said in a memo to partners and directors seen by the Financial Times on Tuesday. “Having this transaction process over our heads for an extended period would increase the risk of distraction, and we should not continue to incur transaction-related expenses for an outcome that remains uncertain.”

A major concern for some US executive committee partners was the “scope” of the deal, which determined how different parts of the business were to be divided in the spin-off.

Di Sibio’s plan was for most of the $11 billion-a-year tax business to be transferred as part of the advisory arm, but senior US auditors opposed it, fearing the firm lacked the expertise. necessary to carry out quality audits.

Pause to breathe

“Everyone is still in agreement with the strategic intent and the strategic issues that were behind it. [Project Everest]. How to execute it was the problem,” said a senior EY partner involved in the spin-off negotiations. “In particular, it was the execution around an in-depth specialist service that both companies wanted to have, namely tax activity.”

Another partner said the plan to pursue an alternative form of transaction was “bad news” as it “will mean the paralysis continues”.

A third partner said governance may need to be addressed before any further transactions.

“No one wants to relive that where the [US executive committee] plays the game for a good chunk of the year and then blinds everyone,” the person said, reflecting the view of some international partners that the US company has backtracked on the plan to submit the division of Everest to partner votes.

Finding a deal that EY partners can agree on will be the hardest part. Alternatives that will be considered should include selling the consulting business to a competitor, a large technology company or a private equity firm. “I think we have to keep all our options open,” said one of the partners.

A memo from global management sent to EY’s 390,000 employees on Tuesday signaled that big changes in strategy would be needed even without a split on the immediate horizon.

“Winning in a rapidly changing market and better preparing for a future transaction will require us to adapt our governance, operating model, cost structures, capital investments and go-to-market approach,” the committee wrote. 18-person global executive in the memo, seen by the Financial Times. “Globally, we are committed to making changes that allow all of our businesses to thrive.”

Asked what those changes would be, the senior partner involved in the negotiations said: “We’re only a few days into making the decision, so I think we need to think a bit.”

The reference to “cost structures” has caused some concern. One of the partners called it “deeply disturbing”.

Another concern for the partners will be the bill for the aborted breakup plan, which was already in the hundreds of millions of dollars and will now have to be covered by profits.

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The explosion of uncertainty over the future is also likely to cause the partners to reconsider their position within the company as their rivals try to take advantage of the turmoil.

A partner at another consulting firm said he was contacted by several people from EY looking for new jobs. “It’s lucky for EY that the consultancy market has slowed down, otherwise every other company would be going in there like going into Whole Foods with a giant shopping cart,” he said.

“We will continue to shake the tree and see what comes out of it,” said another rival partner of a Big Four company.

The biggest question mark, however, remains at the top of the company – no one inside EY or in the industry is sure who can or will replace Di Sibio.

“There is going to be a power vacuum,” said one of the associates of a rival firm, pointing to the involvement of almost every senior EY executive in the Everest debacle.

Part of any successor’s job will be to build bridges between warring factions within EY and heal the wounds that have opened up in recent months.

One of the partners who was heavily involved in the failed plan said: “It’s all fixable and we can restore trust, but you’re not going to do it overnight.”