Why Grant Thornton Jumped Ship in Hong Kong

by Cesar Bacani, 08 November 2010

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topics:
Accounting and Regulations Auditing

tags:
advisory services Albert Au auditing BDO big four accounting firms Gabriel Azedo Grant Thornton tax service

What would an accounting firm do if the international network it belongs to decides it should become part of an integrated entity serving the China market? For some partners and staff of Grant Thornton Hong Kong, the answer is to move to rival BDO. “We consider BDO, which is run independently in Hong Kong and China, respectively, as a model that suits us better,” Patrick Rozario, chief executive of Grant Thornton in Hong Kong, told the South China Morning Post.

Which is just fine with Albert Au, chairman and CEO of BDO Hong Kong. “It was a real golden opportunity for us because this sort of thing just doesn’t happen every day,” he says. The en masse admission of specialists from an accounting firm founded in 1949 will double BDO’s size overnight to more than 1,000 people, if the deal is finalised by the end of the year. In Hong Kong and China, says Au, BDO will become as large as any of the Big Four firms in those two markets combined.

Au spoke to CFO Innovation’s Cesar Bacani on how the union came about, the implications on clients and the accounting sector, and other issues.

Is this really a merger of two accounting firms?

I would not call it a merger. It is more of an admission of partners and the employment of all their professional staff over to our firm, because they are all joining BDO.

All 500 are joining BDO as individuals, not as partners and employees of Grant Thornton?

That’s correct. They are leaving the Grant Thornton International network as their member [firm], the entire lot. We’re talking about picking up the entire firm’s people. So you can imagine why I said in my interview with the SCMP that I thought it was a real golden opportunity for us because this sort of thing just doesn’t happen every day.

It’s not like a situation where the firm disintegrates and people leave in all directions. This is not the case. A firm of that size, with a track record of more than 50 years – the firm originated originally in 1949 – it’s a very rare opportunity. It is a rare opportunity for us to take up the talents from that firm en masse.

How did this come about? Did you actually make the first move and say: why don’t you come over here?

Obviously this sort of thing, it doesn't happen overnight.

We have had a very successful merger that took place only last year. We took over the member firm of Horwath, one of the top mid-tier firms in Hong Kong. I think the people in Hong Kong in our profession took notice of that and I guess they have been following that merger very closely. Everybody’s thinking that if you have a merger, you’re going to have fallout. Is it working? Is it successful?

I like to think that merger turned out very well. Every partner that came over, every staff that came over, they are still with us today. I think that perhaps gave the GT firm in Hong Kong, when they were considering a move, that level of comfort. Not to say that the Big Four have a poor track record [in mergers or en masse admission], I’m not implying that. But I guess [Grant Thornton accountants] said: Hey, this is good, they have done it well.

We actually started talking quite some time ago. And we said: hey, wait a minute, we just started our merger with Horwath, so we didn’t want to take it up during that time.

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