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PwC sells government consulting operation for a dollar. What’s the scam?

by Michael West | Jun 26, 2023 | What's the scam?

What’s the scam with PwC flogging its government consulting operation to private equity mob Allegro Funds Management?

The scam is that the scandal over selling government secrets has hurt PwC in a real way, there is pressure from the global partners over to exit to rehabilitate the brand, and they have found some private equity turnaround players in Allegro who will take on the risk of salvaging that $300m a year in government contracts.

Does this include state government consulting work? Probably not as the Big 4 write more than a billion a year in business consulting to governments. We don’t know yet though and state procurement disclosures are foggy at best, non-existent at worse.

This from a corporate lawyer:

“There are always offshore intervention rights under the brand licensing agreement – to protect the brand – does not mean control, just a threat of intervention and loss of the brand. PwC Global would have the right to terminate Aust’s use of the brand under enumerated conditions, including material compliance with a list of standards. 

“There would have been termination procedures if brand use was withdrawn or modified. Everyone would have been reading these over the last few months – and the local partners would then start to fight amongst themselves as to how this might operate in this case.  This takes time to sink in – then acceptance gradually takes over before depression sets in.

“I suspect that PwC global  threatened to withdraw the brand permission for the Gov’t business. There would be numerous legal opinions about this circulating in Sydney London and NewYork.  

“Allegro then looked at taking govt off their hands and demanded a sweetener – that PwC throw in the risk business too – to enhance the package. It’s a useful adjunct for Allegra to add to Slater and Gordon. Expect them to build this portfolio.” 

Allegro has no expertise in government consulting, they are “turnaround” merchants having a punt to salvage some value. It is unlikely there would be earn-outs or kickbacks to PwC as the government would surely check this. The global PwC partnership has just said “get us out of this!”.

So the scandal has taken a huge toll on the firm already – government consulting was the fast-growth element which has delivered double digit revenue returns for the Big 4 in recent years.

Now to the meaty bit. The next Senate inquiry is into the secretive partnership structures of the Big 4 and will no doubt go to the guts of the problem that they are just too powerful, too opaque and too conflicted.

The problem with PWC and the Big 4 – treason is the business model

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Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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