BDO reported Thursday that total combined fee income across its worldwide network of firms reached $9.6 billion for the fiscal year ending Sept. 30, 2019, representing year-over-year growth of 10.1 percent, up from 8.3 percent growth in 2018.
The Americas remained BDO’s largest region this year, bringing in 52.7 percent of revenue, and it saw the strongest revenue increase of 15.7 percent. The EMEA (Europe, Middle East and Africa) region also performed well, growing 12.9 percent, while in the Asia Pacific region, several BDO member firms have seen spectacular growth, including Pakistan (up 38 percent), India (up 30 percent) and Indonesia (up 21 percent). Individual firms’ strong organic growth has also helped strengthen several regions for BDO. In Australia, Chile, Lithuania, Mexico, the Netherlands, Peru, Romania, Saudi Arabia and Singapore, for example, BDO firms have all seen double-digit growth.
BDO USA CEO Wayne Berson pointed out that many of the member firms in 167 countries are following the lead of the U.S. firm, which has grown in the past seven years from $618 million to $1.64 billion.
“What's happening is you're seeing a lot of these member firms are seeing what the U.S. firm has done, and success breeds success,” he told Accounting Today. “They're seeing the benefits of getting bigger. A firm doesn't always want to get bigger just to be bigger, but there are a lot of reasons why you really want to get bigger. And I think these other firms have seen what's going on in the U.S. and how that's led to further success.”
Audit and assurance remain BDO’s largest service line, accounting for 42.4 percent of its revenues. That figure was somewhat less than in 2018, as advisory and business services and outsourcing have increased their contribution, at 21.2 percent and 15.4 percent, respectively. Tax services income remains similar to last year, at 21.1 percent.
Member firms are also embracing BDO’s global strategy of growth. “What you see is a focus on leadership around the world as opposed to leadership in one or two geographic markets,” said Berson.
The firm has also been attracting young Gen Z employees by offering advanced technology. “What we are seeing is innovation that is spearheaded by the BDO Innovation Hub,” said Berson. “That has led to benefits in assurance, tax and advisory. All of the key business lines have benefited as a result of the investment and for us to be able to leverage technology. It's all about technology.”
Among the areas where BDO has been investing are artificial intelligence, robotic process automation, data analytics and blockchain. “There are tremendous opportunities in blockchain, helping our clients get value out of blockchain,” said Berson. “That has become a big deal. People used to think of data analytics being sort of just one area of auditing, but now it's everything you do. It's in all the practice areas, advisory, tax, assurance and everything in the management of an accounting firm. We have hired more data scientists in the last year than in the previous 109 years. There are tremendous opportunities.”
BDO has been active on the merger front internationally, particularly in acquiring technology firms. In 2019, key mergers included BDO in Australia combining with Consolid8, a cloud accounting and business advisory firm. One of BDO’s biggest mergers was with Moore Stephens in the U.K. Another important acquisition was Grant Thornton’s firm in South Africa.
The U.S. firm continues to be BDO’s merger leader, acquiring customs and international trade practice Global Trade Strategies Inc. in Atlanta and the crisis management and business continuity consulting and technology firm Lootok in New York, among others.
Berson has been spearheading the drive for mergers and has overseen 45 deals since he became CEO seven years ago. “We expect to close three deals pretty soon that hopefully would be effective Jan. 1,” he said.
Berson said he looks for specific factors when evaluating an M&A deal: “We don't want to do a deal with a firm that doesn't share our culture,” he said. “And for us, it's all centered around our strategic plan. And as we work through the plan, that's our North Star.”
He also looks at prominence in the local markets and particular industry specializations. “At BDO, we have a deep industry focus,” said Berson. “For the industries that we really specialize in, we want firms that are coming into BDO to share that level of expertise. So for us, health care obviously is top of mind, as are life sciences and the not-for-profit sector. These are areas where we see tremendous opportunities. When we look at a particular geography, it's a bit different because advisory is really a national practice.”
However, he sees New York as a key market, as well as Miami, Washington, D.C., California and Texas, along with BDO’s home base in Chicago.
“We're also looking at some of our smaller markets and saying, ‘OK, we've got $20 million in revenue in a particular market. Well, what if we did a deal that got us to $40 million? How is that going to change? And that may not be a bad thing for that particular market,” said Berson. “You can corner a market. That's what happened in Madison, Wisconsin. We looked at that as a tremendous opportunity for us to to bring in a practice that added to our existing media practice, and we doubled in size.”
