Australian Financial Review is reporting today that PwC Australia may be in talks with private equity to sell off its poisoned government, education and healthcare practice. The private equity firm named in the report is Allegro Funds.
It is understood a term sheet about a potential deal has been drawn up outlining details of the deal. But there are ongoing discussions about the remit of any new independent firm and whether it will work only for the public sector or also take on private sector clients.
AFR Weekend has been told that the potential deal could include 100 partners and 1000 staff, or roughly 10 per cent of the existing firm. That means the business would theoretically generate about $200 million to $250 million in billings.
The partners that would be part of this deal believe that the move will provide them with independence from PwC and allow them to again bid for government contracts.
A PwC spokesman told AFR they would not “comment on market speculation”.
For months now PwC has been dealing with a PR storm, the loss of critical clients, and government inquiries directly related to the leak of confidential government tax information by ex-partner Peter Collins, information that was then leveraged to hatch tax avoidance schemes to sell to clients. The tax scandal has destroyed the firm’s existing engagements and brought the issue of government overreliance on outside consultants to the mainstream. Labor senator Deborah O’Neill, who has been verbally handing PwC their ass since this started, is not impressed by this plan. “If this potential deal is to be believed, it indicates that, yet again, PwC is putting its reputation and profit ahead of truth-telling,” Senator O’Neill said.
The Senate Finance and Public Administration References Committee released a damning report earlier this week (embedded below, published to their website as PwCAcalculatedbreachoftrust.pdf LOL) that outlines exactly what happened with Collins and how the firm used thousands of claims of legal professional privilege to conceal its internal documents from the Australian Tax Office. “The question of who inside PwC was involved in the misuse of confidential information remains unanswered,” reads the report.
Because the Tax Practitioners Board (TPB) found that PwC had failed to have adequate arrangements in place to manage conflicts of interest that arose in relation to its activities as a registered tax agent and breached subsection 30-10(5) of the Code of Professional Conduct, PwC is required to take certain steps to manage conflicts of interest.
These steps include:
- ensuring the education of its staff about conflicts of interest;
- ensuring the coordination of registration of conflicts;
- introducing a better governance and reporting system within the firm; and
- twice a year PwC will be required to report to the TPB on the progress of the changes they are making.
Nowhere does it say “sell off the cursed business and resume as usual.”
A recent survey by public policy think-tank The Australia Institute found that four-in-five Australians (79%) want PwC banned from receiving new government work, nearly half of those surveyed think the ban should be permanent. Just 2% did not think PwC should be banned from government work, while 19% did not know or were not sure.
45% thought the ban should be permanent while the remainder supported a ban for at least some period of time, either less than two years (5%), between two and five years (12%), or between five and 10 years (16%).
The full PwCAcalculatedbreachoftrust.pdf report for your reading pleasure: