BDO MANAGING PARTNER Simon Michaels says it’s “business as usual” for the firm follow its merger with PKF.
What he means is that the deal has failed to knock the wind out of BDO’s sails. That isn’t to say that a huge amount of work hasn’t gone into it.
Having passed the 100 day milestone earlier this month following the deal’s completion on 28 March, much has gone on. The co-location of the 700 PKF staff is set to finish, while common platforms for HR, IT and finance systems have already been established.
“We wanted to deal with the ‘crunchy’ integration points,” explains Michaels. “We’ve heard of stories where co-location hasn’t happened – didn’t want that.”
‘Business as usual’ also means that BDO and its new members can go to market as one firm. “There is a level of energy and enthusiasm, people are committed to making it work.”
Michaels has visited the firm’s offices to greet the new people, while workshops have already been held to discuss the firm’s ambitions and strategy.
The firm is looking to operate from a bigger platform to offer more services and become the leading mid-market firm. “It’s not complicated,” explains Michaels. “We’re not trying to re-engineer.”
Avoiding partner churn
But bringing two firms together often sees a multitude of partners and staff shed in the tidying up phase.
Michaels insists that this hasn’t happened – and isn’t likely to. The “vast majority” of partners have come across, apart from a few that were approaching retirement. There have been 40 redundancies in back office and support, a relatively low number where the merger enabled some job vacancies to be filled. “With any big deal you’d expect surprises, but touch wood, things have gone surprisingly smoothly.”
There have been virtually no client losses, apart from where conflicts have arisen – such as having to ditch the FRC audit previously undertaken by PKF.
Benefits have already been recognised – with PKF’s management consulting and public sector expertise combined with BDO to put together a stronger offering through the government procurement framework ConsultancyONE.
“We’re making sure everyone understands what the firm has to offer, then people tune into the detail. ‘Getting to know you’ takes time. It’s a couple of years’ work.”
Mid-market focus, FTSE 350 ambition
Market opportunities abound for the firm, he believes. The Competition Commission’s outline to open up big audits beyond the Big Four will “create [market] liquidity”. But the benefits of the commission’s relatively subtle approach, such as avoiding turning the capital markets upside down, is that it will take years for the commission’s recommendations to have effect.
“Prejudices” against firms outside the Big Four are “so deep”, believes Michaels, that it will take five-to-ten years to change. But BDO has a “realistic ambition” to increase its share of FTSE350 audits to 5% in five years, from 2%. Already providing advisory services to 30% of the FTSE 350, Michaels hopes this will increase to 50% in that time period.
This must not be to the detriment of its core mid-market though.
“It’s flawed thinking to only be focused on the FTSE 350. We’re very proud of our domestic position, and our international network. Lots of our clients are regionally-based.” Further opportunities will come from these clients, who may be looking to overseas territories for growth.
As for the accountancy profession, Michaels expects further consolidation among firms – and BDO will look to take further merger opportunities if they arise. If these happen BDO will avoid leveraging its balance sheet and stick with its merger strategy, rather than that of acquisition.
Michaels affords himself a wry smile: “We’re not in a hurry to do something else, there’s enough to be getting on with at the moment – we’re keeping our powder dry.”
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