Top story: EY racked up ~$700M in debt during failed spin-off attempt

EY spent a pretty penny trying to spin-off their consulting business.

EY’s attempt to split its consulting and audit businesses through Project Everest left the global professional services firm grappling with significant financial repercussions. According to recently filed accounts, EY had a $700 million credit facility to fund the initiative, $270 million of which remained unpaid as of June 2024. The facility was eventually repaid in full by October, ahead of schedule, as confirmed by a company source.

Project Everest, which aimed to separate EY’s consulting and audit practices to sidestep conflict-of-interest restrictions, was abandoned in April 2023 after failing to gain support from U.S. leadership. The fallout from the canceled plan added to EY’s financial strain, with total spending on professional fees, including legal costs, reaching $600 million before the initiative’s collapse.

Despite this, EY managed a modest 3.9% revenue increase globally in its fiscal year, reaching $51.2 billion. Strong performance in audit and tax offset a flat consulting business, which had been expected to see accelerated growth had Project Everest succeeded.

The firm’s global operating company, funded through levies on its national member partnerships, reported $74 million in interest payments, more than doubling the prior year’s figure. However, EY highlighted its proactive financial planning in addressing these debts, including repaying the credit facility 16 months ahead of schedule.

Under the leadership of new global CEO Janet Truncale, EY is charting a revised strategic course focused on growth. Truncale has emphasized investments in transformation and sustainability advisory services, as well as an expansion of managed services offerings. These moves aim to rebuild momentum and drive revenue growth, positioning EY to recover from the financial and reputational challenges of Project Everest’s failure.

While Project Everest’s collapse marked a major setback, EY’s ability to navigate the financial aftermath and pivot to new growth opportunities underscores its resilience in an increasingly competitive industry landscape.

Read more here.

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