Grant Thornton Prepares to Strike As BDO Cast Out

One of Australia’s largest accounting firms is in doubt after 68 partners in the NSW-Victoria practice were expelled for debt issues that made the parent company uncomfortable.

Pat Donato, CEO of the southern practices, was surprised when the letter from the Brussels-based parent company came in the mail at 8am Friday. The letter terminated the network agreement due to “several risk issues”. International CEO Martin van Rockel explained”

Potential risks emerging mean it would be irresponsible of us to delay actionj any further. In the best interests of BDO, we can no longer allow BDO NSW-VIC Pty Ltd to operate as part of the BDO network, due to unreasonable risk.

Grant Thornton soon released a statement saying it was negotiating a bailout package for BDO’s $88 southern branch, which employs 500 staff. Under the merger, it would be expected Grant Thornton would take on a reduced debt in exchange for securing it. BankWest has yet to comment on the size of the potential haircut it will take.

BDO has grown in the last decade to become the sixth largest firm by revenue in Australia, and the parent company believe they will soon reestablish themselves as a dominant player in the domestic market. The debt arised from a 2007 deal that saw selected partners cash out their goodwill in order for the Sydney, Canberra and Melbourne offices to amalgamate. The firm financed the $75 million deal with around $65 million of funds borrowed from BankWest. The difficult economic climate has contributed to BDO’s struggle to get on top of the debt, which the BDO parent company has been monitoring closely.

Grant Thornton has also emerged as a dominant player in the medium tier accounting and tax firms, and a potential merger will significantly increase the profile of the ambitious firm who have dreams of Big Four status. It is unlikely that much will change at employee level, with BDO Chairman confident of a resolution.

 

Tagged accounting, BDO, Grant Thornton