The fire sale is the latest instalment in the biggest scandal in Australian business in many years.
PwC has been reeling since some of its partners were revealed to have used confidential tax advice it gave to the government to also help multinational company clients minimise their tax by getting around the tax laws.
The $1 sale is an act of desperation, a last ditch effort to save the government consulting arm after state and federal governments around the country said they would no longer hire it.
Around 1750 staff and partners will move to the new firm in the hope it will save their jobs.
They hope that by severing their link with PwC and by taking only government clients, they will be welcomed back into the fold.
Certainly it’s a neat way of doing away with potential conflicts of interest - essentially having only the one client.
The company is currently being referred to as Project Bell but will soon be rebranded in a move to further distance itself from PwC.
It will be a public sector specialist and not take any private work - the first of its kind in Australia, but likely not the last.
The role of consultants is coming under increasing scrutiny in the wake of the PwC scandal.
The hollowing-out of the public sector in recent years means governments are more reliant than ever on consultants to fill knowledge gaps or make up for reduced staff numbers. And of course, it’s always handy for a government department or minister to have a report from a big name consultancy to endorse their latest initiative.
There’s unlikely to be a reduction in the amount governments spend on consultants, but the consultants’ independence will come into sharper focus. Other firms with private and public sector clients might have to follow PwC’s lead and split into a private sector arm and a public sector arm.
It’s hard not to have some sympathy for the partners in the consulting arm.
After investing years of work at the firm to win a partnership, and hence a share in its ownership, they have ended up with nothing. All their labour and equity has been sold for $1.
Even if the move is a success, and Project Bell retains existing PwC government contracts and wins new ones, the partners will still remain worse off.
Allegro is expected to spend a few hundred million dollars getting the new business up and running and will want a very good return on that investment when it sells the business.
In the normal course of events, this money would have gone to the partners by way of partnership distributions. Their acceptance of the deal with Allegro deal reveals how poor their prospects were had they remained at PwC.
It remains to be seen if the plan will work.
Politicians and public figures have so far been non-committal, saying they will wait and see what the new structure looks like. But they will want to be very sure it won’t have any potential conflicts of interests and has robust governance and ethics.
No one wants to be the idiot who rehired the PwC people and found themselves mired in another scandal.
Meanwhile, the remaining PwC tax and audit business has brought in a new leader from PwC Singapore to run the firm in Australia.
Long-time PwC partner Kevin Burrowes will move to Australia as soon as he can get his working visa sorted out.
PwC says he’ll concentrate on ethics and controls.
“He brings a fresh perspective to the firm and he will work with his colleagues and management team to re-earn trust with PwC’s Australian stakeholders,” PwC global governance board chair Justin Carroll said in a statement.
But it remains to be seen what this PwC insider will do. Will he genuinely reform the business culture (what’s more, how will he do it?) or will it just be business as usual, papered over with a new management and governance structure?
PwC could start by publicly naming the 63 former and current partners and staff who received, then leaked, the emails containing confidential government tax information.
As long as the firm refuses to take this basic step, it is hard to believe the firm has learned any lessons at all.
