PwC staff to seek the highest bidder

Private equity group Allegro Funds’ founding partners Chester Moynihan, Adrian Loader and Fay Bou. Picture: Oscar Colman

Some of the PwC Australia partners and staff in the government consulting arm are expected to shop their credentials hard to competitors this week now that there is a clearer picture of the terms being offered for the unit by Allegro Funds.

The understanding in the market in the past week is that a number of PwC Australia staff have been keen to jump ship, but have held back to determine whether they are better off staying with PwC, or, if they work for the accounting firm’s government consulting unit, move with Allegro Funds.

Now there’s some more clarity around the Allegro deal.

With a binding term sheet in place and the deal which was set to transact on July 1, the 1750 employees – including 130 partners – in the unit will no doubt be using the Allegro proposals as leverage for a job with a new employer, or vice versa, where they force Allegro to pay more with a competing job proposal.

DataRoom understands that four or five private equity funds were approached to buy the PwC government consulting arm before a deal progressed with Allegro, first tipped by this column to be the buyer of the unit.

DataRoom can reveal that among the firms which were approached were Anchorage Capital Partners as well as BGH Capital.

Exactly what partners and staff join the newly named Scyne Advisory remains up for negotiation, but one question on the minds of some in the market is whether Allegro makes redundancies in the year after it has bought the business if revenue expectations are not met.

And who funds the redundancy costs?

It’s widely known in the investment banking world that government departments are not known for paying lucrative fees for work, so some are asking how profitable the unit will be, particularly if some contracts are handed out to competitors in the future.

And if the profitability doesn’t meet expectations, will Allegro still invest $100m into the business that it is buying for $1 – or less?

Allegro, which will own 75 per cent of the new firm, says the money will be used for employment and operating costs which are considered by the market to be for working capital rather than growth.

The expectation is that the contracts Allegro will have in place will include clawbacks and other adjustment mechanisms.

It’s a delicate balance for Allegro, and the jury’s still out whether the buyout fund can make it all work.