Accounting firms mergers possible by-product of PwC scandal

PwC placing itself up for sale could solve the problem of brand damage.

As the scandal surrounding PwC intensifies, some wonder whether a global merger of accounting firms could be the ultimate outcome.

The federal government has sent a strong indication that PwC is not about to get off lightly with its leaks of confidential government information on tax changes to clients, and some believe that the damage from the scandal will be far reaching.

PwC placing itself up for sale would solve the problem of brand damage, and for a rival firm it would be a way to buy a large platform of talent at a time sourcing top accountants in the market is a tough ask.

The new owner could weed out advisers implicated in the tax scandal and take out a competitor in one hit.

It wouldn’t be the first merger among accounting firms. In 2018, PwC itself bought PPB Advisory, but the key differences is that PPB was only an Australian firm.

Some industry insiders disagree that a merger could be an outcome in the aftermath of the PwC fallout. They say that when it emerged that Arthur Andersen had been involved in questionable accounting practices for energy company Enron, the firm collapsed, rather than being bought by a rival.

PwC has over 300,000 staff globally, and its Australia team is about 8000.

One senior source said the view was that PwC needed to collapse its tax consulting business, and that while the firm contracts it would be unlikely to disappear entirely.

Top staff from the firm who were not locked into partnerships would likely exit, with it likely to lose about $500m of government work it carries out, including defence contracts.

Yet many of its contracts were long term, and it was difficult for companies to extract themselves.

Other firms have had scandals overseas and have weathered the storm, including KPMG, which faced a corruption scandal in South Africa.

Elsewhere, equities operatives Mark Himpoo and Simon Hudson are understood to have been among the departures from investment bank Jarden, while institutional equities director Matthew Moffatt is understood to have resigned to join Jefferies.

It comes amid speculation a analysts could jump ship, with sources suggesting Bank of America or Citi could be in the market for staff to boost their equities research capabilities.

Sources close to Jarden have denied any suggestion it has plans for its equities or research operations to be wound back.