PwC China plans to spin off its Dark Lab cyber security arm in a private buyout deal, as the Big Four firm seeks to improve liquidity and navigate the financial fallout from its audit of failed Chinese property developer Evergrande.
PwC China’s board and Dark Lab’s management have been evaluating bids in recent weeks, said three people familiar with the process. There is no certainty of a deal, but the rare partner-led spin-off now being favoured could generate about 1 billion to 2 billion Hong Kong dollars (€115 million-€231 million), with a final price still to be negotiated, said two of the people.
The business unit, with more than 200 staff, offers cyber security consulting services regionally and globally, including simulations of hacking scenarios, according to its website.
The buyout deal has been marketed to private equity funds and investment banks for help with funding, according to bankers privy to the deal. However, major global funds have shown caution given the regulatory sensitivities surrounding China’s cyber security sector, they said.
A sale would provide a cash boost as PwC grapples with the financial consequences of its Evergrande audits, which gave the property group a clean bill of health for more than a decade.
The firm also faces a potentially costly lawsuit from Evergrande’s liquidators, who have alleged “negligence” and “misrepresentation” in its work for the company.
In September, China’s finance ministry banned PwC from doing business in the mainland for six months, alleging the firm “concealed or even condoned” fraud in its Evergrande audits.
PwC was fined 441 million renminbi (€56 million), and revenues were hit as dozens of Chinese clients switched to rival firms. Many partners have had their compensation reduced in recent months, according to people familiar with the matter, and at least 71 have left their roles over the same period in the biggest wave of departures in five years.
The firm has also delayed payouts to recently retired partners in Hong Kong and mainland China, the Financial Times reported last month.
The sale of Dark Lab also indicates a strategic change by PwC China’s leadership, which is moving away from the consulting business and “repurposing towards auditing”, said a person with knowledge of the matter.
The firm resigned as Evergrande’s auditor in 2023. In March last year, Beijing accused the developer and its founder Hui Ka Yan of inflating revenues by almost $80 billion (€72 million) in 2019 and 2020.
PwC declined to comment. – Copyright The Financial Times Limited 2025
