BDO’s Russian member firm bucked the
credit crunch in 2008 with revenue growth of 42 percent to more
than RUB4.11 billion ($129 million) but the firm is predicting much
tighter results in 2009.

BDO Unicon is regarded as Russia’s
fifth-largest firm in terms of revenue, but is often ranked as
number two in national tables as PricewaterhouseCoopers is the only
Big Four firm that publishes results.

It has a uniquely dominant position in the
mid-tier, with more than four times the fee income of the next
largest firm, RSM Top Audit, according to the 2008
International Accounting Bulletin Russia survey (see
issue 436

While 2008 growth of 42 percent was dramatic
compared with results from most markets worldwide, it is a
significant drop from the 65 percent fee income growth the firm
experienced in 2007. Furthermore, partner Alexander Verenkov
expects fee income will remain static, or grow just slightly in

This decline in fortune is not due to reduced
client numbers, but fee pressure as Russia’s public sector and
corporates look to cut their spending in the face of the economic

Competition is tough and Big Four firms are
pricing their services two or three times lower than before,
Verenkov said.

“Big corporations are choosing their auditors
or their consultants based on the current competition. They arrange
tenders so we are pitching to clients together with Big Four
companies and sometimes they propose lower fees than we do,” he

Verenkov said BDO is unlikely to drop its fees
at similar rates because it does not change the same brand premium
as the Big Four and generally has a tighter profit margin.

Services lines that are seeing shrinking
demand include the consultancy services the firm provides to public
authorities, because their funding has diminished. Demand for large
IT system development programmes is also dropping.

However, there is stable demand for the
implementation of SAP projects for large companies and the firm is
also expanding its services to other Commonwealth of Independent
State countries where there are new BDO offices, including
Azerbaijan and Georgia.

Other strong-performing business lines
included financial advisory services, particularly valuations and
due diligence, purchase price allocation and special advisory

The firm’s tax and legal services received a
significant boost from a project supporting the development of
Russian oil and gas giant Gazprom’s Shtokman gas field.

“We were developing a budgetary system for
Gazprom, all kinds of IT consultancy, tax and legal support for
certain projects and now we are doing a project on managing
subsidiaries abroad… working with other BDO firms,” Verenkov

Verenkov said the firm’s growing reputation
has also helped its growth.

In 2008, the firm saw a lot of demand for IFRS
services and for the past two to three years it has begun to offer
more services to the capital markets. Several large IPOs also added
to revenue. Another steady but not financially lucrative line is
consulting and advisory services for big state corporations, which
Verenkov noted play an increasingly important role in the

The firm does not earn high fees for this work
but it is very prestigious and establishing relations with the
state is valuable, Verenkov said.

“We are positioning ourselves as a purely
national company, orientated to the national economy and to the
support of Russian enterprises,” he explained.