Private equity group stalks PwC government consulting arm

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Private equity group Allegro Funds is in talks to buy PwC’s government consulting business as well as its healthcare and education operations, as the fallout of the firm’s tax leaks scandal continues.

PwC had ring-fenced its government consulting business after revelations earlier this year that its head of international tax, Peter Collins, had leaked confidential government information to other staff at PwC and the firm’s clients.

MPs were united in their scathing assessment of PwC in a Senate report this week.Credit: Luis Enrique Ascui

People with knowledge of the deal confirmed PwC was in talks with Allegro’s partners in an attempt to strike a deal to further safeguard the business from the fallout of PwC’s ongoing issues.

The deal was still in the early stages of negotiations, but is expected to include almost 10 per cent of the firm’s existing staff cohort, or several hundred staffers.

News of the potential transaction came as the Australian Securities and Investments Commission (ASIC) told a Senate committee it was considering banning Collins’ financial services advice in the future after discovering he had an Australian Financial Services licence (AFSL) until he left PwC last year.

PwC has been under pressure after an investigation by the Tax Practitioners Board found Collins leaked confidential information about government plans to combat multinational tax avoidance.

This week, the Senate Economics Committee released its first report into its inquiry into the tax scandal, as politicians from all major parties united to accuse PwC of a “calculated breach of trust” by covering up and attempting to minimise the seriousness of the tax leak scandal.

The report said that PwC had frustrated investigations with claims of client confidentiality, and failed to report Collins’ leaks to the government.

On Friday, ASIC told the committee Collins was a representative under the accounting firm’s financial services licence, held by Pricewaterhouse Securities Ltd.

ASIC deputy chair Sarah Court told the hearing that as Collins was a representative of PwC’s AFSL, the regulator had the power to investigate his conduct and was doing so.

PwC acting chief executive Kristin Stubbins.

“We are assessing whether there are sufficient grounds to take action to prevent Mr Collins from providing financial services in the future,” Court told the hearing.

Court said ASIC would also review whether any other PwC partners or the firm had breached any financial services laws, following questions from Labor senator Deborah O’Neill. Court said PwC’s AFSL had about 160 representatives.

PwC’s government consultancy business is one of the firm’s growth businesses, but it has been under pressure with the federal and NSW governments pausing all future contracts with the firm while inquiries were under way.

PwC attempted to assuage the concerns of its government partners by announcing, via a letter to staff written by acting chief executive Kristin Stubbins, that it would ring-fence the government consultancy group.

“We are moving to quickly establish separate governance and oversight arrangements for the business by the end of September,” Stubbins wrote.

“It will cover all services to federal government departments and agencies, include people, operations and governance within its perimeter and be operationally ring-fenced from other businesses within PwC Australia.”

PwC and Allegro declined to comment.

Allegro has built its name in Australia for investing in businesses that need to be turned around or restructured. It has also previously bought businesses where existing staff retain some ownership.

This includes its takeover of law firm Slater & Gordon, which had been struggling as a listed ASX company since 2015 when its $1 billion acquisition of UK group Quindell nearly destroyed the firm. Under that deal, staff will be able to increase their shares in the group over time.

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