Article:

Consolidation will drive growth in the mid-market

11 May 2016

There was an evident theme to the discussion at the latest BDO Global Board Meeting in Cape Town – consolidation.

For some time, one of BDO’s strategic pillars has been to lead consolidation in the mid-market. It’s something we do well and given our ability to continually widen the gap between our market position and that of the firm at number six, evidence suggests the plan is working.

Our focus is on continuing this growth by proactively seeking opportunities to further consolidate the mid-market and provide our clients with a clear choice for high quality service from an international network. At the global level, this consolidation is being led out of the US and Europe, where we are seeing a lot of movement for our BDO member firms, whether it be mergers (whole of firm or part firm) or lateral hires (partner groups or practice groups).

In my opinion, further market consolidation this year is inevitable and, as a network, BDO will realise tangible benefits from it.

In today’s low growth environment, the firms who’ll strive in the mid-market will be those that can stand apart and prove a genuine point of difference to attract targets. This is exactly the position BDO is in. We are uniquely positioned to provide our clients with nimble and responsive service using a personal approach, while giving them access to global coverage and experts who can handle the most complex of business issues.

Increased investment in audit approach

One example is our ability to continually enhance our audit approach. While others in the market, especially the Big 4, are focusing increasingly on their Advisory offering as their core service, at BDO audit remains a large and important part of our business.

Our audit approach is consistent around the world and we are investing heavily in audit efficiencies and data analytics to enhance the value proposition for our clients. This gives us a genuine competitive advantage in this space.

We will be investing significantly in digital platforms (think portals and other such online tools) this year. In our view, all firms need to do this, but not all of them have the ability to.

Servicing our international clients

Across the BDO network, referred business between our member firms in different countries is increasing materially year on year. This provides another example for me and the other Global Board members that our growth strategy is working.

It’s a trend that, in reality, shouldn’t be all that surprising, given that most of our clients are becoming more global in their outlook and aspirations.

Outperforming the market

BDO’s global target is $10 billion in fee revenue by 2019 and we believe we can achieve it. Our compound annual growth rate is 7.2%, well above the industry growth rate of 5.6%. While our targets have seemed ambitious to date, we continue to realise them.

A major contributor to this success is our network in the Asia Pacific region. Growth rates for our member firms in the area are continually strong, with revenues now exceeding $1 billion. This is a 15% contribution to BDO’s global fees, and our plan is to increase this further. In particular, momentum is being maintained in China, with BDO now in the Top Three firms in the country, employing more than 10,000 partners and staff.

Luckily enough, I work in a capacity that allows me to witness this Asia Pacific growth first hand, while also seeing the valuable contribution we make at the global level. I’m looking forward to seeing our progress in the lead up to when my colleagues and I next meet as a Global Board.