Senate committee chair says the sale to private equity fund Allegro won’t solve cultural issues at PwC

Placing PwC’s unit up for sale could solve the problem of brand damage. Picture: Damian Shaw

The chair of an inquiry examining PwC Australia says moves to sell the firm’s government consulting business, in a deal that could see private equity player Allegro Funds snap up the operation, would not solve broader cultural questions.

Liberal Senator Richard Colbeck, who is chairing the inquiry into the management and assurance of integrity by consulting services, told The Australian the touted sale of PwC’s government operation wouldn’t change facts on the ground.

“It doesn’t matter what its name is,” he said.

“You’re still going to want from a client perspective an assurance and a demonstrated assurance you can trust the work being done.”

The move to put the government operation up for sale comes as PwC has faced weeks of withering criticism over the firm’s use of confidential tax briefings to create tax minimisation strategies for tech companies.

The response from the Department of Finance and Treasury to the scandal puts in danger PwC’s rivers of gold from commonwealth and state contracts, which net the firm as much as $500m in annual revenue.

Finance ordered PwC to remove all personnel directly involved in, or with knowledge of, the tax leaks from all commonwealth contracts, as well as putting in place rules for assessing new deals that would effectively see the firm barred.

The Australian’s DataRoom column, which revealed the deal, understands the government business is now on the block after PwC first touted plans to “ringfence” the business and stand down partners working on commonwealth contracts connected to the confidentiality breaches.

PwC announced plans to ringfence the government business in May, with the firm moving to appoint a stand-alone governance board and executive.

One theory is the private equity firm Allegro is positioning itself as a buyer of the government unit because of its close links to PwC.

Allegro recently purchased the law firm Slater and Gordon, and it is not inconceivable that Allegro puts the PwC spin off together with that business.

Market sources say that merger and acquisition discussions have been happening around the market about PwC, which also offers services in mergers and acquisitions and corporate finance as well as insolvency,

PwC’s moves to branch into consulting for energy and infrastructure companies on energy transition projects have proved lucrative for the firm.

PwC placing the unit up for sale to go without those implicated in the tax information leaks distances the government operation from the recent controversies that have dogged the firm,

It also gets the unit off the books when it is unlikely to be generating any large amounts of new work following on from the latest concerns under the PwC banner and would be no longer a cost to the firm.

Allegro is an opportunistic buyer and could take the unit off its hands for a nominal sum.

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

Senator Richard Colbeck. Picture: Martin Ollman

Senator Colbeck said “phoenixing it into another name” and offloading PwC’s profitable government operation, which is facing the threat of more than $530m in government contracts, would not go to demonstrating probity.

He said the integrity questions around PwC went beyond the firm’s government business or even its Australian operation and extended to partners in other countries.

“The emails that have been published demonstrate links to the US, UK, and other countries, so I don’t see how attempting to ring fence the local consultancy actually deals with PwC’s broader issues,” he said.

The deal would likely see as many as 1000 staff from the firm change hands.

Senator Colbeck was among a trio of parliamentarians that slammed PwC over its handling of inquiries around the firm’s use of confidential information.

He told The Australian it was clear PwC “don’t get what we’re saying” and was failing to properly respond to the scandal facing the firm.

PwC has faced calls to name its staff and partners who handled the confidential tax advice shared by the firm’s former head of international tax Peter Collins.

Last week PwC handed a list of 63 names to the Senate, but Senator Colbeck said publishing the list would not have been fair “on some people”.

“It’s just another demonstration of them not having the appropriate awareness of doing what they should be doing, in looking after people,” he said.

PwC and Allegro declined to comment.