The new firm will have combined revenues of approximately £560m, which takes it into fifth place but still only a quarter of the size of KPMG, the smallest of the Big Four.
It will have 264 partners and 5,000 total staff members.
BDO has announced that it is in “advanced merger discussions” and that partners of both firms have voted in favour of it, subject to final contracts. The deal is expected to be completed in spring 2019. The firm will take on the BDO brand, as it will remain part of BDO globally.
The deal comes at a time when a there is a lot of focus on competition in the market with a number of high profile reviews on-going, including from the Competition and Markets Authority, Lord Kingman and the Business, Energy and Industrial Strategy committee. BDO called for a 80% market share cap on the number of FTSE 350 and public interest companies that the Big Four can audit.
BDO enjoyed a strong year in 2017, with reported annual revenues up by 5.7% to £428m and profits up by 11% to £87.6m. The equity partners saw their average profits per partner grow by 22% from £360,000 in 2015/16 to £454,000 this year.
Paul Eagland, BDO UK managing partner, BDO, said, “If ever there were a time for firms to turbo-charge their growth, it’s now. As a combined firm, we offer greater choice, competition and scalability to the top-end of the market, and are better placed to deal with any economic disturbance from Brexit.
“It was clear from our first meeting that we share similar culture and values. As professional services firms, our people are our greatest asset and it is essential that we create an enlarged business that retains the best of our similar cultures. Both firms are full of innovative people who are experts in their field – this will continue.
“BDO is in a great position in the market, both in the UK and across the world as part of an $8bn BDO global organisation. In the last 12 months – in the wake of Carillion and the subsequent focus on competition in the audit market – the UK market now has a better appreciation of BDO’s capability and quality. This deal increases our credibility further and proves our commitment to competing in the top-end of the market," added Eagland.
Earlier this year BDO South Africa announced a merger with Grant Thornton Johannesburg. The merger followed BDO’s purchase of Grant Thornton offices in Cape Town and Port Elizabeth in February.
Revenues at Moore Stephens have grown 13% to £137.5m this year, but profits remained at £24.1m.
The top 10 firm said it made significant investments in technology and resources across the firm, which had an impact on profits growth. Since its merger with Chantrey Vellacott three years ago, the firm has doubled its fee income and grown organically by 43%.
Simon Gallagher, managing partner, Moore Stephens LLP, said, “To be entering final discussions to create the largest UK accountancy firm focused on entrepreneurially-spirited and fast-growing businesses is exciting – and critical for market competition. The proposed merger provides a platform for continued, sustainable growth, as well as offering something different to the market at this important time.
“Clients are asking us to deliver an ever-increasing range and depth of solutions, provided globally. Combining with BDO makes providing that much easier.”
The proposed deal relates only to Moore Stephens LLP, consisting of the London, Birmingham, Reading, Bristol and Watford offices of the current Moore Stephens UK network. BDO plans to take on a second office in the City to accommodate the growth.