Former PwC CEO reveals previous consulting spin-off plans

Former PwC chief executive Luke Sayers has made a surprise revelation during his appearance before the Senate, stating that the local firm had proposed spinning off its consulting business back in 2019.

The Australian Senate’s ongoing inquiry into the consulting industry has perhaps heard its biggest bombshell to date with the appearance of former PwC boss Luke Sayers, who revealed that the Big Four firm had explored selling off its local consulting business as far back as 2018 due to concerns over conflicts of interest.

Nixed by PwC’s global leadership, Sayers would ultimately depart to establish his own eponymous consultancy two years on.

According to his testimony, Sayers had led a high-level internal project dubbed ‘Kookaburra’ looking into strategic options to resolve what he described as the inherent conflict within the professional services model, with concerns over both the firm’s growing business across its primary lines as well as a decline in audit quality. The conclusion was to spin out the firm’s consulting arm, which was suggested to be worth as much as $1 billion.

“We thought that if we divested the consulting business, then obviously that would free up that business to take on additional capital to invest in intellectual property and best practices and people and so on,” Sayers explained during the hearing. “And there would also be some proceeds to put back in to make sure that we were doing everything we can and should around audit quality and the like, and it would structurally remove a piece of the conflicted puzzle if you will.”

Putting in approximately twelve months of detailed work, the project advanced to the point where Sayers and a local leadership team would then fly to New York to pitch the proposed spin-out – which further included PwC’s New Zealand and Southeast Asian consulting arms – to the firm’s global partners, who are said to have rejected the bid based on the practical ‘impossibility’ of carving out the consulting business in just certain jurisdictions.

Sayers though was pulled up by Labor senator Deborah O’Neill, who referred to a PwC submission to an earlier industry inquiry under his watch in which the firm claimed that a structural separation of its auditing and consulting divisions would cripple its operations. “That makes me question everything that you’ve been telling me today, because those two things are completely at odds,” O’Neill said of the firm’s public stance and supposed actions in private.

Also, it’s not entirely clear from the reports if the proposed divestment was intended as a management buyout akin to EY’s recent failed split-bid or a sale on the open market, but it’s easy enough in hindsight to suspect that Sayers may have been eyeing a larger personal slice of the firm’s lucrative consulting business. Alongside its Big Four rivals, PwC’s consulting division grew to become the firm’s biggest money-spinner during Sayers’ tenure as chief.

While Sayers moved on to establish his own business advisory, PwC has ended up selling off a significant chunk of its advisory practice as proposed, not for the suggested $1 billion but rather just the $1 following the firm’s government tax breach. Ironically, the resulting public sector breakaway, Sycne Advisory, was given the green light by the Finance Department on the same day as Sayer’s appearance.