The government business of big four accounting firm PWC has been sold for $1 to a group called Allegro Funds, while the local business has been usurped by its global parent, with a new CEO jetted in from the Singapore office to run the show. And some bigger changes are on the way!

Explaining the takeover, PwC’s global chairman Bob Moritz made it clear that PwC Australia had “failed to meet the network’s code of conduct and uphold the network’s professional standards and values.”

The new boss for PwC Australia, Kevin Burrowes, becomes a partner in the local firm and will set about making changes with the goal of reinstating trust in the PwC brand.

In case you’ve forgotten, in simple terms here’s what PwC did wrong: in advising the Federal Government on plans to tax multinational companies more effectively and heavily, one of its top executives passed on the inside information to work colleagues, who allegedly then shared it with multinational clients. They’re accused of ripping off their client i.e., the Australian Government and its owners, Australian taxpayers!

But what’s the future going to look like for PwC? And will they ever again be held in the same high regard?

Allegro Funds will pay a $1 and then run the business contracts for the Government that were once signed with PWC. However, not all is lost for the people who work at PwC, as around 130 partners and 1,750 staff will do the work for Allegro Funds.

Effectively, a new company (now tagged as “Bell”) will be formed that will have around $300 million in expected billings. PwC has basically sold its consultancy arm of the business for $1 and any profits from the Government contracts will go to the new company and Allegro Funds.

It also means that essential Government work will be completed, and the PwC staff won’t be left out in the cold because its leaders screwed up, big time.

Why do the partners go along for the Allegro bailout ride? Well, not all PwC partners were guilty of the charges levelled at the firm. In more simple terms, it would be too costly and time-killing to brief new people, with many of the contracts and work already in place and proceeding.

Is this punishment big enough? The AFR has put the cost of this brand-smashing mistake or treachery into context: “The proposed transaction means PwC will stop all its government advisory work at both the state and federal levels. This represents about 20 per cent of the firm’s undisclosed FY23 revenue, the firm said.”

Why is a private equity business now buying an accountancy consultancy business? In fact, Allegro Funds is a business turnaround specialist, as the AFR explained: “Since it was founded in 2004, the fund has acquired 27 businesses and sold 18 of these investments. This year it acquired listed law firm Slater & Gordon for $78 million and sold Pizza Hut to California’s Flynn Restaurant Group.”

The lesson for all businesses from this PwC fall from grace is that if you decide to ignore what’s ethically right, the potential cost could be huge!