Nassim Khadem Reporter

Nassim covers the accounting and tax rounds for BRW, as well as general business news. She previously worked for The Age newspaper covering general news, state politics and economics.

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BDO International taps up China to beat the Big Four

Published 12 July 2013 11:47, Updated 18 July 2013 00:45

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BDO International taps up China to beat the Big Four

BDO is now China’s fifth biggest accountancy firm, ahead of Big Four member KPMG, which is sixth. Photo: Reuters

The global chief of BDO International, the world’s fifth-largest accountancy network, has vowed to surpass the “Big Four” in revenue within five to ten years.

Martin van Roekel is in Australia this week for meetings with BDO executives from China and Asia Pacific about how to grow business from these emerging economies.

He told BRW that the accounting firm has plans to surpass the Big Four firms – PricewaterhouseCoopers, Ernst & Young, KPMG and Deloitte – through their partnership with the Chinese.

“If I look five to 10 years ahead, I expect that Chinese firms will have leading positions in their respective network and will play a very important role within those networks and within the development of the profession,” van Roekel says.

“Looking 10 years ahead I expect that BDO in China will have revenues that will for sure exceed $US1 billion ($1.1 billion) to $US2 billion.”

The combined fee income of all the BDO member globally was $6 billion in 2012. The BDO worldwide network has 1204 offices in 138 countries and more than 53,933 people provide advisory services.

Founded in 1963, the firm operates each of its member companies as an independent legal entity in each country. BDO’s Australian network ran into trouble last year when its combined Victoria-NSW practice – together with its 68 partners and 500 staff – was dumped from the firm because of bad debt.

Mid-tier goes to China

BDO International has been rapidly expanding in China. It has about 7000 staff in mainland China and Hong Kong, its second largest per-country headcount after the United States, where it employs about 11,500 people.

The recent ranking of the top firms in China – from the Chinese Institute of Certified Public Accountants (CICPA) – shows BDO is now the country’s fifth biggest accountancy firm, surpassing KPMG in ranking. Known as BDO Li Xin, it has a 10 per cent market share.

In June, RSM International and Crowe Horwath International announced their member firms, RSM China and Crowe Horwath China have merged, creating one of that nation’s top five accounting firms, with combined annual revenue of Yuan2.8 billion ($498 million).

The merged firm Ruihua China, now has 334 partners and 9,000 staff members, with offices in 38 cities in China. CICPA 2011 figures put its combined revenue of Yuan2.3 billion, ahead of KPMG China on Yuan1.9 billion and roughly on par with Ernst & Young at number three.

“If we look at the growth rate of the big four firms and other firms like BDO – firms outside the big four have been able to realise impressive growth,” van Roekel says.

“It’s more than likely that BDO will increase its position in the national ranking in the next couple of years. And with the growing importance of the Chinese economy, that will impact on the global positioning of BDO as well.”

According to the CICPA – which has called for domestic accounting firms to “grow bigger and stronger” via mergers – the revenues of the top 10 Chinese companies grew 38 percent year-on-year in 2011, while revenues for the Big Four in China rose just 6 per cent.

The CICPA also reported the Big Four’s market share dropped to 25 per cent in 2011 from a peak of 33.5 per cent in 2008.

The Chinese are offering their accountants refunds of membership fees and subsidies if they reach an annual income of Yuan1 billion or rank among the top 15 on CICPA’s annual list.

Chinese government eyes accounting

China’s Ministry of Finance is making no secret of the fact that it wants to localise its accounting industry, which was dismantled after the founding of the People’s Republic in 1949.

The Chinese government has been re-building its accounting industry for the past 30 years and today more local accounting firms are servicing foreign investors.

China wants to reduce the dominance of Big Four western firms, issuing rules that require the Big Four to reduce the proportion of non-local partners to 20 per cent from the current average of 50 per cent by the end of 2017.

Jiandi Zhu, the managing partner of BDO’s Chinese firm, was appointed last year to the BDO global board – the first Chinese firm to have representation on the global board of any international accounting network.

Jiandi says BDO decided to focus on its company in China in 2009 and it remains key to strengthening the firm’s presence in Asia Pacific.

“BDO in China is one of the country’s first accounting firm’s with 85 years of history,” he says. “In 2009 it made the decision to join BDO’s international network.”

Jiandi says working with a western firm like BDO “instantly improves our branding and market perception”. BDO China’s clients includes large state-owned enterprises and Chinese companies.

He says: “For the Chinese companies that are increasingly globalising, the expectation of the Chinese government is that [local] accounting firms would have the ability to service these firms internationally.”

It also immediately opens up opportunities associated with international business. “BDO China has been the beneficiary of significant multinational corporations that have either made investments in China or are engaging in transactions in China.”

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