PwC spin-off Scyne ready to sink or swim

The $1 PwC Australia will receive for what was a $680 million government business is a clear indicator of the risks ahead for the proposed spin-off, Scyne Advisory. But if Scyne can flourish, its success could reshape the entire multibillion-dollar consulting sector.

Scyne’s acting chief executive, veteran PwC partner Richard Gwilym, heads the team charged with managing the split, which is due to be completed at the end of the month. It’s no small task.

Scyne Advisory’s Richard Gwilym has a big job ahead of him.Credit: Louis Trerise

The idea of spinning off PwC’s most lucrative business was unthinkable – and deemed impossible – as recently as June this year. The scandal that engulfed PwC quickly changed that.

While it was a tax partner, Peter Collins, who allegedly used confidential government plans to combat tax avoidance to help the corporate tax dodgers being targeted, retribution was swiftly targeted at the firm’s lucrative government services division. PwC’s government division has subsequently been banned from any new business with the federal and state government departments.

Gwilym is clear about the secret weapon that should help Scyne thrive as it rebuilds its relationship with Australia’s public sector.

“I think there is absolutely a role for a conflict-free organisation, like the one that we’re looking to establish, and one that we think can bring great value to government in terms of the work that it needs support with,” he says.

“There’s an opportunity in the market to really build something differentiated that really allows government to contract with a firm … that brings multidisciplinary teams, real depth of capability in sector experience, to really help them solve some of the biggest challenges that they’re facing right now.”

Gwilym and the other senior partners at Scyne are now charged with winning business for a company that technically does not yet exist.

A final agreement is yet to be signed between PwC and the proposed majority owner of the business, private equity group Allegro Funds. The deal is still on track to be completed this month, which will lead to 1400 PwC staff, including 117 partners, transferring to the new business.

Then comes the hard part. PwC’s government consulting arm generated $680 million in revenue from the federal and state governments last year, largely unaffected by the scandal, but the frequency of work is expected to drop significantly this year.

Scyne has had to reinvent the unit – from a secretive partnership model to a corporate entity that exemplifies what government departments are now demanding as best practice; a corporate entity with an independent board – not controlled by profit-driven partners – and zero conflict with private sector clients.

There is also an 18-month cooling-off period at Scyne for former government ministers, and 12 months for public servants, who will also be subject to review by an independent probity, conflicts and ethics committee.

But the biggest job for Gwilym and his team is talking to the government departments to ensure work is forthcoming, at some stage at least. Gwilym would not talk of progress on this front, but made it clear the focus is on jumping through the hoops being set up for Scyne.

“There’s a very respectful process that we’re working through with both the Department of Finance and with state and territory governments around the country,” he says. “That’s very much focused on the things that they need to see from Scyne in order for them to be comfortable that we can start to recontract work in the market. [The process] has touched on things like, what are the governance structures that we’re going to be putting in place … the policies that we will have in place for ethics, being conflict-free, probity and compliance.”

Scyne does have its critics. Greens senator Barbara Pocock was livid last month amid signs the PwC offshoot was gaining traction.

Senator Barbara Pocock has been one of PwC’s fiercest critics. Credit: Martin Ollman

“It’s disturbing to see that even before any of the current investigations into the tax leaks scandal have been completed, the new PwC offshoot, Scyne Advisory, has been invited back to the table of government consulting work. Despite all the bad publicity and temporary loss of government work, PwC have yet to pay any real penalty for the gross misconduct that has occurred there,” she said.

Nevertheless, the new structure envisaged by Scyne promises to soothe even its sternest critics and, according to Gwilym, set a high bar on transparency and probity that rival consulting firms will have to contend with.

While Gwilym emphasises the scale and expertise Scyne hopes to bring from day one, rivals such as Deloitte have still been selling the line that its business needs to remain intact to provide the full range of expertise from across the group.

“I would suggest that the circumstances that they [PwC] are faced with is a factor in their decision,” Deloitte Australia chairman Tom Imbesi told a NSW inquiry into the government’s use of consultants in August. “From our perspective, we believe that the value that we can provide government is to have the capacity to bring global expertise and private sector expertise as and when required … we have no intention of separating parts of our business because we think that the model we have is best aligned to serving our clients.”

Greens NSW MP Abigail Boyd has been conducting an inquiry into the state’s use of consulting services.

But Imbesi was on the back foot when grilled by Greens NSW senator Abigail Boyd about Deloitte’s attitude towards informing the government about potential conflicts when doing work for the government, as well as private sector clients who could benefit from inside government information.

“I appreciate your point, chair, that the opportunity should be for government to make that decision, as opposed to us internally,” he said of declaring potential conflicts.

As Scyne readies for launch, Gwilym was asked what lessons the new business would take from its insider experience of the PwC scandal.

“I’m probably not going to comment too much on the past, other than to say we’re very conscious of where we’ve come from, we are very conscious of what we need to demonstrate, both to our clients, the market, and to our staff,” he says.

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