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PWC China is planning to spin off the Darkrabo Cybersecurity Arm with a private buyout agreement as Big Four companies are looking to improve liquidity and navigate financial fallout from an audit of failed Chinese real estate developer Evergrande.
The board of directors of PWC China and management of Dark Lab have been evaluating bids in recent weeks, said three people familiar with the process. There is no certainty about the deal, but the rare partner-driven spinoff currently favored could generate around $1 billion of $2 billion (US$128 million to US$208 million), with the final price still being negotiated, the two said.
The business unit, with more than 200 staff, offers cybersecurity consulting services locally and globally, including simulations of hacking scenarios, according to the website.
According to the agreement’s approval, the buyout transactions are being sold to private equity funds and investment banks to help raise funds. But given the regulatory sensitivity surrounding China’s cybersecurity sector, major global funds have shown caution, they said.
Sales will boost cash as PWC is working on the economic outcomes of the Evergrande audit.
The company is also facing a potentially expensive lawsuit from Evergrande liquidators, who claims “negligence” and “false communication” in the company’s work.
In September, China’s Treasury Ministry banned the PWC from running business on the mainland for six months, and even claimed “hidden or tolerated” fraud in the Evergrande audit.
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The PWC was a yuan fine ($62 million) and revenues increased as dozens of Chinese clients switched to rival companies. Many partners have cut their pay in recent months, according to people familiar with the issue, with at least 71 leaving their roles in the same period with the biggest departure wave in five years.
The company has also delayed payments to recently retired partners in Hong Kong and mainland China, the Financial Times reported last month.
Dark Lab sales also show strategic changes due to PWC China’s leadership. This is said by people with knowledge of the issue, moving away from the consulting business and “reusing it for audits.”
The company resigned in 2023 as an auditor for Evergrande. Last March, Beijing accused the developer and its founder Hui Ka Yan of nearly $800 billion in 2019 and 2020.
The PWC declined to comment.
