BDO and Grant Thornton in Canada discuss merger

It was announced on Friday that the number five and six accounting firms in Canada, Grant Thornton LLP and BDO Dunwoody LLP, have entered into discussions on the possibility of merging. The firms are both members of their international networks, Grant Thornton International and BDO International. If merged, the combined firm would take the name of one of the firms.

Grant Thornton, with about $400 million in annual fees, is currently the country’s fifth-largest accounting firm, with more than 2,900 employees and 370 partners in 99 offices across Canada. BDO, with $300 million in annual fees, is the sixth largest, with more than 1,900 employees and 315 partners in 95 offices across Canada.

HandshakeThe decision to merge will be done by early July, and will require the support of at least 75% of the partners of both firms. This could be pretty huge in Canada, as the combined firms would be 2nd in the country in terms of the number of partners.

Grant Thornton LLP and BDO Dunwoody LLP said their proposed merger will create a national firm with 685 partners and 4,800 staff operating out of 194 locations. A spokesperson for the firms said that no offices will be closed and there will be no job cuts as a result of the merger. The combined entity will be the second biggest accounting firm in Canada, with only global giant Deloitte and Touche LLP larger in terms of number of people.

By revenue, however, the combined firm would still trail the Big Four by a large margin. The two firms simply don’t target the top level of public companies in Canada, from which the lion’s share of the Big Four’s revenue comes from.

The comment about job cuts is pretty funny, for anyone following the red-hot market for accounting professionals. I suppose it’s pretty standard fare for the business journalist writing about a potential merger to mention any foreseen effect on jobs. But really, I’m sure no one at either firm is worried about their job security.

This is probably the most interesting story in Canadian accounting so far in 2007. The effect on the audit market in the country could be substantial, as the combined firm would present a strong alternative to the Big Four for that second-tier of public companies whose needs may be better met by a smaller firm with a better partner-to-staff ratio.

The main question is what this new firm, if it materializes, will be called and how it will fit internationally. If it becomes GT in Canada, does BDO International start looking for a new firm here to take on the BDO name, and vice versa? Both firms have strong brand value, so it’s hard to see either international arm simply giving up on the country.

7 thoughts on “BDO and Grant Thornton in Canada discuss merger

  1. I agree that if the merger goes through, there are unlikely to be job cuts with professional staff, but the non-prof. workers are a different story. There would be duplication of support functions in the merged company, and I would expect layoffs in that area. Even if a non-prof. staff member does not lose their job, they may be demoted – e.g. both BDO and GT have directors or HR, but the merged company can only have one head, so the loser will have to work as a subordinate for the winner, or get a lateral transfer. In mergers, it is often middle management who suffer them most.

  2. Edmund – Thank you for your comments! :)

    You’re right about there being some potential for job losses on the HR side, and I would assume in the IT departments too. It’ll definitely be interesting to see where these discussions go, and whether the two firms become one in the future.

  3. Wow, that *is* huge news indeed. Or a meaty rumour, anyway.

    I wonder whether the global offices may try to kibosh the move, or whether they may even mimic it?

    It’d be interesting to “up” the group from “big four” to “big five”, but as you allude to in your posting, aside from a headcount perspective, some would argue that BDOGT would also need to win some big clients to increase the absolute revenue numbers.

    In that vein, it’s interesting to see McBeath say “We don’t want to be part of a Big Five. We want to be a clear alternative to the Big Four.”

    I’ve heard that BDO wants to move up to the Big Four/Five ranks, whereas GT is happy with its current position.

    The difference the GT head enunciates in thate quote is subtle but critical. I wonder how much of an effect it will have?

  4. Does anyone know which firm will they pick? I’m stressing out because the firm I work for in Portugal do have plans to merge with GT or RSM. So if the canadian firms merge with GT i guess partners would pick GT in a blink.
    Keep me in touch guys!!!

  5. Hi Rui – Thanks for your comments!

    It’s strange you posted this today though, since BDO and GT here announced they have called off the merger. See my post about it here.

    I have a feeling we will hear about more mergers in the future…

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