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July 30, 2014

BDO US revenues grow by 22%

BDO US chief executive Wayne Berson tells International Accounting Bulletin about the drivers of the firm’s 22% revenue increase and the future opportunities and challenges in the market.

BDO US has announced a 22%, $150m increase in its annual revenue to 30 June 2014, with fee income totalling $833m. BDO US chief executive Wayne Berson tells IAB the firm has its sights firmly set on reaching the $1bn mark in annual revenues.
The firm’s advisory services performed particularly well, marking a 23% increase in revenue, while tax and assurance followed at 22.7% and 21%, respectively.

The results show growth has doubled since 2013, when BDO US’s reported revenue increase was 11%, totalling $683m.
Among the firm’s service lines, BDO’s assurance services provide the lion’s share of the firm’s business at 58% and are worth $483.2m. Tax services represent the second-largest service line at 32% and $266.6m, while advisory counts for 10%, weighing in at $83.2m.

Overall growth was fuelled in equal parts by service-demand driven organic growth (11%) and successful expansion strategy (11%), explains Berson.

Alongside a general trend towards recovery in the economy, increasing demand for succession strategies has provided fertile ground for the firm’s inorganic growth in the US.

"When you look at the number of accounting firms in the US you have roughly 45,000 firms and of those firms roughly 2,000 have more than 25 people, so there are not a lot of firms that are large firms," Berson explains.

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"When you take those 2,000 firms and you look at the ages of the partner group, you’ll find that about 60% of those partners are over the age of 50 and the majority of those firms don’t have succession plans."

As such, he says: "The opportunity is to create a win-win situation where you have a firm that doesn’t have a succession plan, that needs to do something to sustain the firm, and BDO is looking for opportunities to grow in certain markets, so if there’s a firm in a market that we’re interested in growing in, it’s a win-win situation: they come in to us, they can thrive in our environment and we benefit from bringing in additional talent."

This expansion strategy, exemplified over the past two years, has garnered significant attention within the industry and is praised by Berson for contributing to the firm’s overall growth surge.

He says: "If you look at the US in the calendar year 2013, there were 93 deals with accounting firms in calendar 2013 and we did five. We’ve done nine since I took over as chief executive in 2012. No other top-100 firm did more than two, so we are doing more deals than anyone else."

According to Berson, the upsurge is not solely attributable to an aggressive expansion strategy: "We are seeing a tremendous amount of interest from the firms; they’re calling us. It’s not only us going to the firm; we’re getting them approaching us."
Moreover, he adds, a changing regulatory environment has increased opportunities in sectors such as health care: "There is a tremendous amount of opportunity in the health care industry.

Regulation has changed and created opportunities for all of us and what we try to do is position ourselves in the right way so we’re there to take advantage of opportunities."

With possibilities for investment finally on the rise, and an eye set on sustainable growth, BDO is also looking to reinvest some of these profits into the business itself, says Berson. "What we’re trying to do is look for the long-term sustainability of our firms and look at the opportunities," he says.

"So looking at geography, where we need to be in the country, looking at industries that have potential for future growth, what we’re trying to do is plough some of the profits back into the firm, as opposed to taking everything out."

People and future goals
While remaining optimistic about the firm’s prospects, Berson recognises multiple challenges facing BDO over the coming years. Among them, the biggest challenge is posed by human resources. "I would say number one would be people – getting the right people in place," he says. "We’re growing, so we’re looking for more talent all of the time, and then I would say it’s picking out the best opportunity."

Looking to the future, however, there’s one particular goal Berson has his sights set on: "I would like to see us over a billion dollars, I think that’s a key statistic to get to."

"I don’t think bigger is always better," he adds. "But in this situation I do believe there’s a certain level of respect that comes from being over a billion dollars.

"When you look at BDO internationally we are the fifth-largest network. There is a substantial gap between five and six, but not in the US. We want to get bigger in the US. Currently in the US we’re number seven, but we’re making inroads."
And with projections for next year including "probably about 8-9% growth" and "an acquisition or two", Berson’s $1bn goal looks well within reach. "We’re looking forward to the next year," he concludes. "It could be good."

Related link:
BDO US

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