One of the biggest stories from February 2018 regarding the big 4 accounting firms is that PwC is selling its public sector practice in the United states. They are selling their public sector practice to Veritas Capital.
The PwC practice will retain their staff once they are moved to veritas but they will change their name. PwC’s public sector practice has about 1,500 professionals
If you go to Veritas Capital’s website they say that they are a private equity firm that invests in companies that provide crticial products and services to the government and commercial customers world wide. It also says that they primarily focus on technology or technology based solutions for the government.
This is pretty huge news as PwC had a killer year with 37.7 billion dollars in revenue. This is pwc’s practice that consults the U.S. government. This practice earned PwC $2.4 billion last year on a global basis so it’s a little fishy that PwC is selling this practice right now.
Why would they be selling this practice right now? I’ve listed a few of my theories below.
- Led to a conflict with PwC’s other practices? Oftentimes you can’t compete on certain contracts because another part of your business is conflicted out. PwC could have been facing potential conflicts in more important parts of their business from their public sector practice.
- The growth of PwC’s U.S. public sector practice was declining – It’s not clear how much money the U.S. segment of PwC’s public practice was earning each year nor what the growth rate was. Maybe PwC was just not going this practice as fast as they’d like to be. It just seems weird to me that PwC goes out and purchases old businesses like GE’s tax department, but they don’t want to keep old businesses like a public sector practice.
- PwC was losing clients to Deloitte, EY, and KPMG – PwC might have been consistently losing large contracts to Deloitte, EY or KPMG, so they decided to throw in the towel instead of keep competing in this arena anymore.
- Veritas made an offer that PwC couldn’t refuse
- PwC forecast of the public sector market is not as pessimistic as Veritas’ view of the public sector market.
Do you agree or disagree with these theories. Let us know your thoughts in the comments below.