New SEC rules on auditor independence have forced PricewaterhouseCoopers (PwC) to sell its US corporate value consulting (CVC) arm to Standard & Poor.
The CVC unit had revenue of around $100 million last year and employed 400 employees in 13 US offices. No figure on the deal has been released.
The CVC division provides valuation and value analysis to major American companies for financial reporting, tax, business combinations, corporate restructurings, capital allocation, and capital structure purposes.
But strict new rules - ironically brought on by the discovery of over 8,000 audit independence violations at PwC - have meant that firms cannot provide as full range of services without the risk of incurring the wrath of the SEC.
PwC's CEO James Schiro said: "We are very pleased that a company of the quality and integrity of Standard & Poor’s has acquired our CVC unit. We built CVC into a $100 million business and now, free of the audit-related regulatory constraints the unit faced as part of our firm, its market potential can be further unleashed."
Upon the closing of the transaction, CVC will be called Standard & Poor’s Corporate Value Consulting and will be part of the Standard & Poor’s organization.
CVC will be led by PwC partner Philip Clements, who will become an executive vice president of Standard & Poor’s, reporting directly to Standard & Poor’s President, Leo C. O'Neill. The company will be headquartered in New York City and will maintain its existing offices in 12 other cities across the U.S during a transition period.
"CVC looks forward to joining Standard & Poor’s," said Clements. “This transaction brings together two businesses that provide complementary financial analysis work centered around objectivity and integrity and that share similar corporate cultures. Standard & Poor’s long-standing tradition of providing independent, third-party objective analysis coupled with its strong management, resources and brand identity, will enable CVC to realize its full business potential.”
The transaction is subject to standard closing conditions, including approval by the Securities & Exchange Commission. The announcement coincided with the day that it was revealed academics have found that the provision of consulting services to audit clients can have a serious effect on the firm's perceived independence.