Accountants to merge, offering new challenge to UK’s ‘big four’

Simon Michaels
Simon Michaels
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ACCOUNTANCY firms BDO and PKF yesterday revealed plans to merge that will see them vying with Grant Thornton to be the fifth largest player in the UK with revenues of about £400 million a year.

The two limited liability partnerships said they were in “advanced discussions to merge in the early part of 2013” in what it understood to be a non-cash deal.

Simon Michaels, managing partner of BDO, said: “Our two firms share a closely-aligned vision to lead in the mid-market, as well as similar cultures and a commitment to deliver exceptional client service.” He said the merged firm would have “a strong balance sheet, as well as unrivalled sector and geographic strength in many areas”.

The merger would see PKF, which has more than 1,200 employees and 20 offices in the UK, become part of BDO International after the merger and re-branded as BDO.

PKF, which is the larger of the two firms north of the Border with 23 partners and directors, has seen revenues come under pressure over the past year, with total income down by £5m to £103.3m in the 12 months to 31 March.

Part of PKF International, its UK operation is headquartered in London and has regional offices including in Edinburgh and Glasgow.

BDO, which has 13 UK offices including one in Glasgow with 13 partners and directors, had fee income of £281.5m in the year to last September.

It is currently the sixth biggest in the UK, after PricewaterhouseCoopers, Deloitte, KPMG, Ernst & Young and Grant Thornton. According to the magazine Accountancy Age, PKF is the 12th largest player in the UK market. After the tie up, the enlarged BDO could surpass Grant Thornton as the largest competitor to the “big four”, with around 3,500 staff and more than 30 offices.

The groups said it was too early to say what the impact would be on staff and offices, but stressed they had a “commitment to growth”.

The deal will be the first merger of its kind in the market for 15 years, according to the groups, and demonstrates their “appetite to invest”.

Martin Goodchild, managing partner at PKF, said: “This is a good strategic decision for both firms who have a desire to lead, from a position of strength, the inevitable consolidation of the mid–tier which is long overdue.

“PKF has built a strong national business dealing with a wide range of clients, particularly entrepreneurs and listed companies but including other markets such as public sector and not for profit.

“This combination will ensure a strong profitable business, creating opportunities for all of our people and our clients, as it will enable them to benefit from new expertise and increased global reach.”

Goodchild will have to put the deal to a vote among the firm’s 70 UK partners. A key detail will be the nature of the profit share scheme – a method by which firms divide each year’s gains between senior executives.

Last year, PKF’s partners split a £14.6m pot between them, equalling £210,000 per person. That compares with BDO’s 200 UK partners, who shared £60m giving them £300,000 a head.