The Carlyle Group
purchased PA Consulting in December 2015. The UK's Parliament released a report on
an investigation of PA Consulting. It
found:
PA showed a serious lack of due care for its client in a number of ways:
it failed to tell UKTI it was procuring the wrong thing; it failed to
provide a full and clear explanation of its costs to UKTI when asked;
and it described passing extra back-office costs to UKTI as being in
UKTI’s interest. PA has told us it accepts it could have been better at
communicating and providing explanations to UKTI. However, its
inconsistent and unclear submissions and explanations, to us and the
National Audit Office as well as to UKTI, seem to us to be more designed
to obfuscate and confuse than to provide clarity
PA’s repeatedly inconsistent explanations are indicative of poor record
keeping and a lack of corporate understanding of what happened. It
beggars belief that this would have got through proper quality assurance
and management review processes. We are also concerned that PA’s bonus
scheme for its partners risks incentivising poor behaviour in the
absence of proper controls. PA has acknowledged that the team
negotiating with UKTI did not have the right skills to undertake a
commercial negotiation or to make fair representations to UKTI. It has
also acknowledged that the issues with the UKTI contract should have
been escalated sooner internally.
UK officials escalated these concerns such that the contract was cancelled in January 2016. Interestingly, PA's CEO
explained why they sold 51% of the firm to Carlyle:
1) PA is net-asset valued so
acquisition and growth by bolt-ons was not easy.
2) PA has a
sizeable pension scheme looking after large numbers of folk expecting
considerable creature comforts in their retirement. This reduces its
agility. The money brought to the table by Carlyle has enabled Middleton
to insist that the substantial number of PA shares still owned by
former employees are cashed-in, which helps incentivise existing and
future staff.
3) It gives PA favoured access to Carlyle’s 200 portfolio
companies. A virtuous circle of Carlyle using one portfolio member to
nurture others.
4) For a small,
family-like organisation it was high time for some growth especially in
the United States where PA has little traction.
I'll add a fifth. PA knew it needed more political gravitas and Carlyle provided. Proof is PA Consulting has a
new gig focused on modernizing Social Security for Scotland. PA Consulting will "work on the development of a new trial Scottish social security system."
Carlyle has
long wanted a piece of social security and individual retirement accounts.
Five years ago, Carlyle Group's David Rubenstein predicted a future
where ordinary savers would be able to invest in private equity, an
industry limited to wealthy individuals and institutions.
PA wants growth in the US and President Trump
recently floated eliminating the tax that funds Social Security.
In a parallel story consulting giant PwC helped the government of India select 75 cashless townships
To qualify as a less-cash townships, the conditions
included the township must have completed deployment of a
payment acceptance infrastructure, and all the families
residing there would have to covered under training
programmes. Also, more than 80 per cent of the total number of
transactions must have been done through digital modes of
payments during the review period.
Social Security and cash may soon be things of the past. Governments and consultants will have conspired to make this happen. Rest assured private equity is
driving both and has
plans to profit every step of the way.
Update 2-20-20: Carlyle is ready to
cash in
on PA Consulting and prefers to sell the company to another private
equity firm. That way the public doesn't see how much cash Carlyle
pulled out of PA during five years of ownership.
