Risk Update

Accounting & Consulting News — Governance, Risks and Re-organisations…

PwC offloads govt consulting to private equity firm Allegro” —

  • “Trouble accounting firm PwC Australia is set to spin off its government consulting business — involving some 130 partners — to private equity firm Allegro for $1, under a deal which will see a new company, currently code named Bell, commit to only working for the public sector.”
  • “The deal, which was announced to some 2,000 PwC staff involved on Sunday, is being fast tracked in the hope that the new company will be able to retain hundreds of millions of dollars of annual consulting fees from state and federal governments, limiting the growing fallout from the PwC tax scandal.”
  • “The new company, which takes in partners involved in PwC’s government, health, infrastructure, and defence (GHID) and Risk Services consultancies, will market itself as a structure that rules out any conflict of interest by only working for government and public sector groups.”
  • “It is hoping this can create a point of difference from the other three big accounting firms in Australia.”
  • “It will not be doing any work for the private sector, to avoid the potential conflict of interest which saw some PwC staff use knowledge gained from its government advisory work on tax to generate fees from multinationals on how to get around the laws.”
  • “The PwC government team spoke with several groups but quickly settled on working with private equity group Allegro, which recently bought law firm Slater and Gordon.”
  • “None of the 130 partners involved in the new Bell group were involved in the potential leaking of information gained from PwC’s tax advisory work with the government on tax for the use of multinational clients.”

BDO to Convert to a Corporation, Replacing US Partnership” —

  • “BDO USA LLP will form a professional services corporation based in Delaware, converting from its current partnership on July 1, the accounting firm said Wednesday.”
  • “Under the new structure, BDO will benefit from certain advantages that ‘position our firm for ongoing success as we continue to grow and transform,’ it said in a statement. The firm will be known as BDO USA P.A.”
  • “The move will enable the sixth-largest US accounting firm to make faster decisions, without the backing of the full partnership, and to streamline its tax structure, among other perks.”
  • “Partnerships often rely on committees to vet strategies, but those efforts can stymie change, said Allan Koltin, a consultant who helps accounting and law firms to develop their business strategies.”
  • “Changing to a corporate structure lowers the tax on an entity’s retained earnings, brings simplicity for partners and makes it easier to attract investment capital, said Eric Sloan, a partner at Gibson Dunn & Crutcher LLP and co-chair of its tax practice group.”
  • “Under a partnership, income is taxed at the partner level and at the highest individual tax rate. But as a corporation, the firm’s earnings would be taxed at a lower corporate tax rate, Sloan said.”