Risk Update

Business of Law and Beyond — PwC Entity Sale to Private Equity Clears Independence/Conflicts Barriers

PwC’s Canada Legal Arm Sees Opportunity for Its Immigration Practice in Sale to Private Equity Firm” —

  • “Big clients will no longer be conflicted out by strict audit rules that law firms allied with PwC had to follow.”
  • “The uncoupling of the tax and immigration mobility business from Big Four accounting giant PwC will open doors for the Canadian immigration law firm allied with PwC, as it will no longer be bound by strict conflicts rules that now govern which clients it can take on, according to the head of the firm’s Canadian immigration practice.”
  • “PwC agreed last week to sell its mobility consulting division to American private equity firm Clayton, Dubilier & Rice for US$2.2 billion. The deal, which covers 5,700 people in 41 locations around the globe, includes 500 Canadians and 200 lawyers and staff at PwC Law, which has offices in Toronto, Montreal and Vancouver.”
  • “‘With our current affiliation with PwC we certainly are bound by independence restrictions,’ said Melodie Molina, a partner with PwC Law in Toronto. ‘Without being part of PwC, it does open up the doors into a market that is free from those audit restrictions.'”
  • “Molina said PwC Law will continue to exist, providing tax and corporate law services, but the immigration practice, which includes both U.S. and Canadian lawyers, will be carved out into a new business.”
  • “PwC, as well as Deloitte and KPMG, hooked up with small but successful business immigration law firms in 2013-14. EY has had an affiliated law firm practicing tax and immigration law firm for even longer. The equity partners in the law firms were also partners in the accounting firms. While there has been shared management in areas such as human resources, the law firms themselves were arms-length operations under regulatory rules.”
  • “David Garson’s firm Guberman Garson allied with Deloitte in 2014 but he left the partnership in February 2020 to go back to running his own boutique firm. He said it was sometimes ‘very difficult’ to bring in big clients because any hint of an audit relationship anywhere else in the world meant the clients would be ‘conflicted out.'”
  • “He said when the Big Four got into the ‘law game’ they probably initially thought it was ‘an essential part’ of what they could offer clients. While that was true to some extent, the issue of operating margins between law and accounting firms differed quite a bit so returns, in the long run, may not have been what they expected. ‘In an immigration firm, typically margins would be 30 to 35%, whereas an accounting firm wants to see 50%,’ he said.”