BDO UK and PKF UK have confirmed today they are in advanced merger discussions, with a view to consolidating under the BDO brand by early 2013.
The newly merged firm will be a BDO International member firm employing 3,500 people and a projected revenue total of up to £400m. This will put the new BDO UK neck and neck with Grant Thornton UK. Grant Thornton UK generated revenues of £417m in the year to 30 June 2012.
BDO UK managing partner Simon Michaels 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. The merged firm will have a strong balance sheet, as well as unrivalled sector and geographic strength in many areas."
"The PKF team will enhance and complement our offerings to clients, bringing consulting expertise along with wide experience across audit, tax and advisory arenas. This exciting development demonstrates that both firms are ambitious for growth," he said.
PKF UK managing partner Martin Goodchild 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."
"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," he said.
PKF in search for UK firm
Following today’s announcement PKF International said it is already in search of a new member firm in the UK.
The departure of the UK firm will leave a gap of around £140m and over 1,600 staff in the PKF International network.
Internationally the PKF network holds a strong position in the US, with firms there bringing in just under $1.2bn of the global $2.6bn total. The Chinese firm is also strong with $132m in annual turnover.
PKF International chairman Wolfgang Hofmann said that while the potential loss of one of the network’s founder members is significant and the UK is a very important market for PKF International, "the PKF brand remains a highly attractive proposition both in the UK and internationally."
"We have already been approached by a number of firms who would like to join PKF International in the UK," he said.
"It is important to PKF that replacement candidates are an appropriate fit in terms of quality, size, technical capacity and culture. While, clearly, there is a desire to secure a replacement firm sooner rather than later, this process will not be rushed at the expense of meeting PKF’s requirements," he added.
BDO UK’s move is likely to present a ‘musical chairs’ scenario in the UK as PKF looks for a new member that is likely to already be a member of another network or association.
The newly merged firm is expected to close the gap between Grant Thornton UK and BDO UK.
In reaction to the news, Grant Thornton UK chief executive Scott Barnes said that he is not surprised by the move and wishes the two firms success in finalising the deal.
"The merger of the two firms does not have great significance on our firm and we were expecting something like this when we set our Ambition 2015 and a turnover target of $500m. We did anticipate that by 2015 there would be some consolidation in the market," he said.
Barnes said that there might be some further consolidation among firms in the UK as a result of the merger as Grant Thornton UK and BDO UK increase their lead on the rest of the mid-tier networks by almost £200m.