September 15, 2019

Accounting Firm M&A Rumor Mill: Will BDO Acquire UHY Next?

It had been a while since we've heard a good M&A rumor so we were excited to get a tip last week about BDO acquiring UHY. Just this week, we've received another tip from a reliable source that BDO would be announcing its acquisition of UHY "very soon." 

Then, unexpectedly, this morning we learned that BDO had acquired one of Ohio's biggest firms, SS&G. The move gives BDO a major presence in Ohio that it previously didn't have, as SS&G has 285 of its 375 employees in the Buckeye State. 

But what about this UHY rumor? Well, until the firms' PR teams get the green light — BDO said they "don't comment on private firm matters" and UHY's co-CEOs Tony Frabotta and Rick Stein didn't return emails — we'll try to give you a rough idea of what BDOUHY (or how about BUDHOY? I think I like BUDHOY) firm might look like.

According to Accounting Today's latest ranking of the biggest 100 U.S. firms, the combined BDO and UHY firm would have:

  • $876 million in revenue, give or take. With the SS&G acquisition, that adds another $90 million to the top line. That allows them to put some distance between their spot at #7 and Crowe Horwath at #8 in the top 10. BDO is still quite a ways behind #6 Grant Thornton.
  • They're both Chicago-based firms, so it's safe to say there will be some consolidation of offices where they have overlap. BDO has 49 firms in the U.S, according to AT; UHY has 14, according to the latest count their website.
  • UHY has 104 partners; that would increase BDO's partnership by about one-third. For the record, SS&G will add 42 partners, per AT's ranking.
  • UHY has just over 700 professionals compared to BDO's 2,300, again, increasing the firm's headcount by nearly one-third. When you throw in SS&G people, the jump in headcount will be over 1,000. 
  • 45% of UHY's business is from tax. BDO is primarily an audit firm — 60% of their business — so this acquisition could be a boost to their tax practice. 

On paper this acquisition seems to make sense. BDO sees an opportunity with a reputable mid-market firm that has a tax practice stronger than its own and UHY has found the suitable mega-firm that is willing and able to throw money at its partners and can put their employees to good use.

But behind the scenes? One source told us that BDO is very interested in UHY's Houston practice. UHY is the 5th largest firm in Houston and with the acquisition, BDO would improve its standing in that market significantly. BDO would also gain a St. Louis office, their first in Missouri. 

Beyond that? Another source tells us that most people he's talked to are "optimistic about it," but admits "they may just be drinking the kool-aid." The thought being that becoming an employee of the #5 or #6 largest firm in the US overnight will be great for their careers.  

Of course we can't know if the giddiness is shared firmwide. As we saw with KPMG's acquisition of Rothstein Kass, there can be some backlash in situations like these with partners breaking off to either start their own firms or join a rival.

We haven't heard anything like that for UHY, but we're still interested in hearing more so if you are familiar with these negotiations or what people are saying inside the firms, email us

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