Big Four accountancy firm PricewaterhouseCoopers (PwC) recently announced that it has spun out its fintech business, eBAM due to a crack down from the FRC regarding a conflict of interest. Soon to be renamed LikeZero, PwC’s proprietary intelligent data capture technology fintech will be sold off in a management buy-out backed by Souter Investments and Manfield Partners Limited.
Developed in 2018 by a team of PwC consultants lead by Michael Lines, eBAM is a technology that enabled financial institutions to automatically scan thousands of pages of complex legal contracts for risks arising from significant regulatory events such as Brexit. Since its creation, the fintech has automated regulatory risk analysis counting major financial institutions among its client base. The former PwC head of contract solutions, Michael Lines, will be LikeZero’s chief executive after the sale. Lines mentioned to Financial News that the buyout was prompted by regulatory limitations on the services that the Big Four firms can provide to the listed companies and the financial institutions they audit.
In a bid to reduce conflicts of interest within auditing, the FRC issued new rules preventing Big Four accountants from selling their own financial tech to audit clients in 2016. Additional FRC limitations were created in 2019 to ban audit firms from providing advisory services that include renumeration and tax advice to certain clients.
Under these limitations, PwC’s fintech created a conflict of interest whereby the company did not adhere to regulations prohibiting it from selling its own technology to its audit clients. Under these regulations by the U.K. audit watchdog, non-audit PwC clients currently using the technology will need to cease.
This is only the latest sale announced as Big Four firms in general are rushing to separate their audit and non-audit businesses due to regulation. The goal is to create greater distance between audit and non-audit businesses to avoid conflict of interest scrutiny. In a statement on the matter, PwC shared that their decision to sell the fintech “was taken in order to maximize its value, given the market limitations of PwC continuing to own the software as a result of audit independence requirements.”
While it is known that five other former PwC employees, alongside Lines, will walk away with minority stakes in the business as part of the buyout, the finer details of the total sale remain undisclosed.