PwC Australia is selling its government services practice for A$1 to a private equity fund by the end of July, the firm announced yesterday, June 25.
Justin Carroll, chair of the board of PwC Australia, supported the deal following the revelations that a former PwC partner had shared confidential tax policy information.
“We have taken this step because it is the right thing do for our public sector clients and to protect the jobs of the c.1,750 talented people in our government business,” said Carroll.
Although an exclusivity deal was signed by Allegro Funds and PwC on Friday, June 23, the buyout has not been finalised. The accounting firm expects to sign a binding agreement with the private equity group by the end of July.
Around 130 partners will move to the new consultancy, known as ‘Bell’ for now, owned by Allegro Funds and former PwC partners. As part of the deal, PwC Australia will divest from all government advisory work – at state and federal levels – conceding approximately 20% of the firm’s 2023 revenue.
The new company Bell will reportedly take on all of these contracts, including an estimated A$300 million ($200 million) in billings, providing consulting services to the Australian government. However, it is unclear if the government will choose to renew these contracts with a new firm.
Rob Silverwood, head of financial advisory at PwC Australia, helped secure the deal with Allegro Funds. In May, he told the Australian Financial Review that private equity groups were hunting for deals and looking for distressed assets to buy.
Allegro Funds has so far not commented publicly on the deal.
Repairing the damage
As part of the divestment plan, PwC is parachuting in a new CEO for the Australian firm as it tries to repair the damage of the tax leaks scandal.
Kevin Burrowes, global clients and industries leader at PwC based in Singapore, will take over from acting CEO Kristin Stubbins once he has relocated to Sydney.
“I will work tirelessly to increase transparency and repair trust with our stakeholders, while also enhancing our governance and culture,” said Burrowes.
The tax leaks scandal broke in January with the revelations that former PwC partner Peter-John Collins shared confidential government information about tax policy with his colleagues. PwC Australia has since admitted that 67 professionals at the firm received information by email.
PwC Australia CEO Tom Seymour resigned in May after admitting he too had been included on email chains with Collins. However, the emails reached PwC professionals in Ireland, Singapore, the UK and the US.
Collins is under investigation by the Australian Federal Police, while the firm is facing a Senate inquiry and conducts its own reviews of its standards and governance.
Bob Moritz, global chair of PwC, issued an apology as part of the June 25 announcement.
“Under past leadership, PwC Australia failed to meet the network’s code of conduct and uphold the network’s professional standards and values,” said Moritz.
“Its past actions are not representative of the work and behaviours of PwC around the world and I am deeply sorry to our clients, our broader stakeholders and our people,” he added.
PwC Australia reiterated that no clients were involved in any wrongdoing and no confidential information was used to enable clients to pay less tax. However, the firm is still facing harsh criticism from politicians.
Deborah O’Neill, Labor senator for New South Wales, argued the deal still does not address the implications of the tax leaks scandal. She accused PwC of “putting profit ahead of truth telling”.
“The unseemly haste to deal with their profit pain, as evidenced here, is at odds with the tardiness of a response to questions that remain unanswered,” O’Neill said in a statement.
“More of the same with a new name is still more of the same,” she added.
Moritz said: “PwC Australia has significant work to do and I am confident that the steps they are taking with the network’s support will result in a stronger firm.”
