A big deal for the mid-tier?

When PartyGaming floats this summer, it will break new ground by using BDO
Stoy Hayward as an auditor. And if the Gibraltar-based poker website enters the
FTSE100, it will be the first FTSE100 company to be audited by a mid-tier firm
since 1998.

BDO’s coup is all the more impressive because it is performing the reporting
accountant work as well. Amid much talk about mid-tier firms taking on the Big
Four, what prospects are there for more competition in corporate finance?

The numbers suggest that the likes of BDO and Grant Thornton, also in the
vanguard of challenging the Big Four, have a mountain to climb.

PricewaterhouseCoopers, Deloitte, KPMG and E&Y made £768m from corporate
finance in 2003-04. The next largest firm, Grant Thornton, made just £26.5m.

In fact, if you add up all the revenues of the next 46 firms in the
Accountancy Age top 50, they are barely equivalent to one of the Big Four.

What is holding the mid-tier back in corporate finance? And for very large
companies with international corporate finance issues, is the global reach of a
Big Four firm the only practical solution for accountancy work? Stephen Bourne,
head of corporate finance at BDO, believes not.

‘For very specialised industries like Shell or HSBC, that reach all parts of
the globe, rather than just the major countries, there are issues. But with
major corporations in six countries, for instance, it’s not so important,’ he

Growing anxieties about conflicts of interest are providing an opportunity
for mid-tier firms. ‘There’s a tougher line being taken on conflicts after Enron
and Sarbanes-Oxley,’ Bourne says.

Rover was a good example. With all of the Big Four advising different parties
or conducting the insolvency proceedings, some of the smaller firms have picked
up work. One BDO partner, for instance, is an inspector.

It may be difficult for the smaller firms to compete with the Big Four head
on. But winning audits of companies the size of PartyGaming can only raise
questions for FDs as to whether or not smaller accountancy firms might be worth

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