Accounting and consulting firm Grant Thornton Australia has stepped up merger talks with the Victorian and New South Wales practices of rival BDO, after BDO International expelled the practices late last week, citing “unreasonable risks.”
The potential merger comes at a tricky time for the professional services industry, with some major firms shedding staff amid falling revenues.
BDO International chief executive Martin van Roekel said in a statement released on Friday that the decision to terminate the BDO Victoria and New South Wales offices had “been taken in the best interests of the international BDO network.”
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“Following a strategic review of the business models of all the BDO member firms in Australia that began 18 months ago, several risk issues have emerged in Sydney and Melbourne, where the two firms have failed to sufficiently progress their plans to prepare for integration,” van Roekel said.
“As a result, the long term interests of BDO, and specifically our strategic global integration plans, may be affected.”
“This would bring about risks that are no longer acceptable to us.
“The financial stability of BDO NSW/VIC Pty Ltd, and their consequent ability to service clients in line with the expectations required of them by BDO is in contrast to the rest of the BDO firms in Australia, which are performing extremely well.”
BDO Australian national chairman Tony Schiffmann added that although the decision would “create some short-term problems,” it was committed to a “strong, long-term presence in Sydney and Melbourne.”
“We are frequently approached by other firms to join our network and we are confident that we will quickly establish a strong and vibrant presence in these cities.”
In a statement, Grant Thornton Australia said it would be “working hard with the BDO NSW and Victorian leadership team during the course of the week ahead to strike a deal that works for everyone,” adding a merger would help it reach its growth target of $300 million by 2015.
“We strongly believe that an outcome that sees BDO in Sydney and Melbourne combine their practices with us under our brand would also be in the best interest of their clients,” it said.
“Of course, the value for us and BDO’s Sydney and Melbourne practices resides to a large degree in moving across the whole rather than only parts of their practice.
“A clear attraction of the merger is that it would represent a milestone in the achievement of our ambitious strategy to grow our business to $300m by 2015.
“We believe it has the potential to be a game-changing development for both our firms and will present many opportunities for our own clients and people to grow.”
According to a report in the Australian Financial Review, the troubles at BDO spring from a 2007 move to amalgamate BDO’s Sydney, Canberra and Melbourne offices, with the firm taking on tens of millions of dollars in unsecured loans to allow partners to cash out the value of their goodwill.