Practice Manager: Is PKF the real deal as BDO plays catch-up?

THE GAP BETWEEN BDO and Grant Thornton, in terms of revenues, has become sizeable. GT’s latest numbers reveal double-digit growth, taking its revenues to £417m.

Our latest Top 50 +50 survey shows that BDO’s estimate for the year ending 29 June 2012 is £281.5m. Partner numbers in 2012 are similar: 203 (GT) compared to 196 (BDO).

In 2008 the gap between the two was £39m, with BDO sitting below GT on £350m. Interestingly, GT – ‘flush’ from bringing RSM Robson Rhodes on board – had 310 partners compared to 243 at BDO.

GT, it would appear, has worked through the indigestion caused by consuming a sizeable business.

The big questions are: Does BDO need to make an acquisition? And can it make one work?

While GT isn’t exactly knocking on the door of the Big Four in terms of size and scale, BDO is closer to seventh-placed RSM Tenon by revenues. Of course, Tenon’s future is itself uncertain.

But perceptions are important. BDO could find itself a poor distant cousin to GT, which would damage its ability to win major clients. BDO needs a boost.

Chatter about a BDO/PKF merger continues. PKF would not seem to be in a great place. Its accounts filing to Companies House revealed a number of concerns: revenues down across the board (bar assurance), a fall in partner distributions, and a £3m increase in its pension deficit. Outlook gloomy.

But can two struggling businesses turn into a great one? “Drowning and trying to grab the same lifebelt,” said one senior advisor to me. Drowning, of course, may be stretching things a bit.

Bringing together two firms that are finding the going tough will not be easy. That’s before taking into account the personalities involved, and tough decisions over offices: bear in mind PKF has 23 compared to BDO’s 13. If PKF finds such a deal unpalatable, the firm might even decide to look at regional options to bulk up themselves.

It’s going to be a busy winter.

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