PwC sells £355 million valued public sector consulting arm to Veritas Capital
Big Four professional services firm PwC has sold its US public sector consulting business to Veritas Capital. The private equity firm snapped up the governmental consulting wing for an undisclosed fee, as PwC seeks to pursue growth in its governmental auditing business without fear of conflicting interests.
PwC’s public sector government consulting business provides consultancy services across many US government agencies including the Department of Defense (DoD), Homeland Security and Veteran Affairs, as well as local governments. The wing currently has about 1,500 in staff and generated nearly £321 million ($451 million) in revenue in 2016, while the unit’s pretax earnings were expected to rise to more than £49 million ($60 million) in 2018 from about £35 million ($50 million).
In spite of this bullish performance, PwC had reportedly been exploring the sale of its government consulting practice since November 2017, with sources close to the firm expecting it to fetch around £355 million ($500 million). This is because the Big Four giants were said to be keen to offload the governmental consulting arm to gain a freer hand in pursuing the growing business of auditing government agencies. Professional standards restrict the kind of consulting services audit companies can offer to government customers, which are deterred by even the appearance of conflicts.
Now, PwC has confirmed the sale of its public sector consulting business to private-equity fund Veritas Capital, for an undisclosed fee. Following the deal, the consultancy business will maintain its current leadership – Scott McIntyre, president and CEO of PwC’s Public Sector will lead it – and operate as a stand-alone company. Morgan Stanley advised PwC on the deal, while Davis Polk & Wardwell served as legal counsel. Schulte Roth & Zabel provided legal counsel to Veritas Capital.
The move will allow PwC to invest in other areas. To this end, the deal provides PwC with a major opportunity to add to its auditing portfolio right off the bat. During the period of negotiations, the Pentagon announced that it would run the first ever agency wide audit of the DoD and its £1.7 trillion ($2.4 trillion) in assets.
PwC US Chairperson and Senior Partner Tim Ryan, said of the sale, “Our U.S. Public Sector business has an excellent brand and client base with a strong record of growth, and this transaction will provide the partners and staff with an opportunity for continued development for both their business and careers. Furthermore, today’s announcement enables our US firm the opportunity for continued growth and investment to best provide ongoing quality and value to our clients.”
Meanwhile, Veritas is planning on expanding the business further. Veritas Capital CEO and managing partner Ramzi Musallam commented, “We look forward to partnering with the management team and assisting with our government sector expertise to continue delivering value to the clients and embark on the next stage of expansion.”
Elsewhere, PwC expanded its auditing offering, by way of a new blockchain platform. PwC partnered global asset management company Northern Trust to launch the new blockchain-based auditing system which will enable audit firms to access fund data stored on a private equity blockchain, in order to audit specific events in real time.