PwC Australia is planning to sell off its government consulting arm to private equity investor Allegro Funds for a nominal fee of $1. 

The proposed buyout, which is yet to be finalised but has received in-principle agreement from PwC's global leaders, would involve the creation of a new company currently codenamed ‘Bell’. 

This new entity would focus exclusively on providing consulting services to public sector organisations and would have an estimated $300 million in theoretical billings.

The sale would see around 130 PwC Australia partners and approximately 1,750 staff, primarily from the firm's government consulting arm, transition to the new company. 

If the deal goes ahead, Allegro Funds would bear the costs of setting up and running the venture. 

PwC's government advisory work at both the state and federal levels, accounting for about 20 per cent of the firm's undisclosed FY23 revenue, would come to a halt.

The move comes in the wake of PwC's tax leaks scandal, which led to the firm being banned from winning new contracts from the Commonwealth. 

The ban severely impacted the business that previously generated around $250 million in annual billings. 

The proposed new company, with separate systems and offices from PwC, aims to address concerns about conflicts of interest by focusing solely on providing consulting services to the public sector.

The interim leadership team of Bell comprises ten PwC partners, including Tim Jackson, PwC's global government and public services advisory leader, and David Sacks, the firm's government consulting practice leader. Allegro Funds' co-founders, Adrian Loader and Fay Bou, are leading the deal.

The potential buyout has garnered mixed reviews from politicians. 

Liberal senator Richard Colbeck cautiously welcomed the proposal but stressed the need for proper vetting of individuals involved. 

Labor senator Deborah O'Neill expressed skepticism, demanding more transparency from PwC regarding the tax leak scandal.

The success of the proposed company hinges on the reaction of the Albanese government and the Department of Finance, as well as PwC's ability to address concerns about the tax leak scandal. The federal health and aged care department has already suspended a “major” contract with PwC.

Allegro Funds has committed to adopting any recommendations from PwC's internal Switkowski review, set to be announced in September.

Allegro Funds, a specialist in turnarounds, manages around $4 billion in assets and has a reputation for taking on high-risk assets. 

PwC Australia has appointed Kevin Burrowes as the new CEO to help navigate the firm's challenges and facilitate the sale of its government business.

While the deal would effectively separate PwC from its government consulting arm, the firm is still assessing whether it will continue to provide statutory audit services to the public sector.