Allegro Funds to buy PwC’s government consulting business

PwC has agreed to sell its government consulting business and parts of its risk operations to Allegro Funds, with the deal set to be announced on Sunday.

PwC has agreed to sell its government consulting business to Allegro Funds, with the deal set to be announced on Sunday, after briefing the government on Friday. Picture: NCA NewsWire / Damian Shaw

PwC is poised to announce it will sell its government consulting business to Allegro Funds in a deal insiders say is set to be announced on Sunday.

Treasurer Jim Chalmers was briefed on the impending deal on Friday, which is set to be announced by PwC and Allegro in a bid to preserve access to government contracts.

The Treasurer is understood to have been broadly aware of the nature of the Allegro buyout of the government consulting business but declined to comment until the government had time to consider the broader implications of the transaction.

The Department of Finance said it had been “verbally briefed” from PwC about “the options that it has been considering on its future governance structure”.

“Decisions around the future governance structure of PwC Australia are a matter for PwC Australia,” a spokeswoman told The Australian.

The deal will see PwC sell its profitable revenue generating government consulting business, which boasts almost 500 people in Canberra and a further 500 spread around Australia providing professional services to the commonwealth and state governments.

It’s understood this will also see some of the risk business change hands.

A term sheet about the deal has been circulating for weeks, which would see PwC shrug off its profitable Canberra operation in a bid to protect it from the scandal that has trashed the firm’s reputation and put in danger almost $500m in government contracts.

Deal insiders said the speed of the deal raised questions about Allegro’s due diligence work.

Allegro recently purchased the law firm Slater and Gordon and insiders expect the firm to face several regulatory hurdles before it can seal the deal on the PwC operation.

Allegro faces Foreign Investment Review Board approval for its purchase, which it previously secured for the Slater and Gordon buyout.

PwC has faced a banishment from commonwealth contracts after the Department of Finance put in place disclosure rules after the scandal unfolding in the firm was revealed in parliament.

PwC had told parliament it was planning on ringfencing its Canberra and government consulting operations, in the wake of the scandal, with plans to appoint an independent board and executives.

A search is currently underway for them.

The sale will now see PwC’s government consulting arm completely hived off in a bid to preserve its access to commonwealth contracts.

PwC has faced withering criticism from members of parliament over its handling of the scandal.

A Senate report published on Wednesday accused the firm of “contempt” in its handling of the scandal and its decision to hand the names of 63 partners and staff to an inquiry, calling for the identities of those linked to the tax scandal, but warning they not be published.

PwC Adelaide managing partner Jamie Briggs has been calling around parliament in recent days flagging the deal in a bid to soothe tempers.

The sale comes after The Australian revealed the deal on Friday and in the wake of months of pressure piled on PwC over the firm’s use of confidential information taken from government tax briefings to sell minimisation strategies to its clients.

PwC’s former head of international tax Peter Collins was banned by the Tax Practitioners Board as a result of his sharing of the confidential information, which the firm monetised.

PwC is now facing multiple investigations ranging from the Australian Federal Police, which was referred the matter and the allegations against Mr Collins, as well as two further regulatory probes.

The TPB has indicated it will be investigating PwCs other tax partners over their role in the scandal, as well as why the firm failed to disclose the use of confidential information sooner.

The Australian Securities and Investments Commission has also indicated it will be casting its glare over PwC’s financial services operations, after finding Mr Collins was operating under the firm’s Australian Financial Services License.

ASIC told parliament on Friday as many as 160 PwC staff were also delegated under the license and could face enforcement action from the corporate regulator.