When accounting goes unaccounted for
A little over a month ago BDO USA began layoffs in audit and, as we predicted at that time, a fresh batch has hit tax now that 10/15 is behind us. According to multiple tipsters, tax layoffs started today. We don’t have numbers at this time.
Fishbowl:
Earlier:
Anyone affected or otherwise in the know is welcome to reach out with details. Consolation and sympathy available upon request.
The results are in at BDO, and the fifth largest accounting firm in the world […]
Usually Adrienne handles these things but I seem to have started a beef, so here goes. Last Friday, I poked fun at BDO Global CEO Jeremy Newman, after he admitted that regulatory intervention in the UK would b up the audit market,” even though that’s the last thing he wants. “It is a shame it has taken so long and that it will require regulatory intervention,” he writes but then immediately qualifies the statement, “though it is not too late for my colleagues in the Big Four, and others, to act on a voluntary basis to create the environment necessary to allow real competition.”
This overt doublespeak caused me to open my post with this:
Perpetual fusspot and BDO Global CEO Jeremy Newman has not been shy about how unfair he thinks the dominance of the Big 4 is. The majority of his blog posts are tagged “Global Accounting” and several consist of bellyaching about Big 4 this and the Big 4 that. Of course, since the mainstream media has finally picked up on the idea that the concentration of auditors could be a bit of a problem […]
Newman wrote another blog post today starting with “I have never understood Twitter” but then did a Twitter search on himself, “not expecting to find anything” but he eventually landed on my blog post. He blockquoted the excerpt above (and linked!) and then wrote this:
Now call me sensitive, but I do not see myself as a “perpetual fusspot” or “bellyaching”- just someone raising a valid concern and one that has now been recognised by others, including the OFT but also the European Commission, MEPs, the UK’s House of Lords and many others, as being a potential issue. I also don’t think the dominance of the Big 4 is “unfair” – I think it is a risk and not in the public interest. And again this view is shared by others – including those who represent the public interest.
Clearly, Mr Sensitive had never graced this fine publication before but I read most of his blog posts and as I pointed out, lots of posts are tagged “Global Accounting” with titles such as “Big 4 bias – can we ever overcome it?,” “Financial Reporting and Auditing: A time for change?,” “There is a Credible Alternative,” and “Restrictive bank covenants keep the Big Four on top….”
Now maybe I’m way off base here but having so many posts (there are more) attributed to this topic, strikes me as someone who is excessively worried about something (i.e. “fussing“). I’m not suggesting he should start doing Mad Men recaps but there is consistent narrative. Plus, the word “fusspot” is funny. Furthermore, evoking “bias,” “can we overcome” and “credible alternative[s]” inherently speak to an unlevel playing field (i.e. “unfair“). Perhaps I’m too wrapped up in semantics but I think my point has been made.
On the bright side, I’m flattered that Mr Newman was offended enough to write a response of sorts (without naming names, unfortunately) and hopefully he finds some things on GC that are to his liking. Unfortunately he still doesn’t appear to be on Twitter, the catalyst to this whole exchange. I encourage JN to join the fun. Then he’ll be able to keep up on himself.
We knew it was only a matter of time before someone filed a class action […]
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Truth 1: Leadership was close to another deal prior to the ESOP deal but had to do the ESOP deal when the other deal fell through at the last second. The interest rate on the loan for the ESOP deal is sucking this firm dry.
Truth 2: A partner who sold in the ESOP deal told me that his equity was worth $100 per unit, for example, prior to the deal and he sold $40 of it. Leadership told the partners that they could earn the $40 back in value appreciation on the retained $60 in 3 years. At the end of 3 years, his $60 per unit was worth less than $62 per unit. Leadership either lied or was just that stupid.
Unfortunately, this is kind of frightening since BDO was prolific on the M&A. A partner who believed in 3 years that the ESOP stock would be worth more than at the transaction date had to have been shown that the ESOP debt would be paid off. Is that possible? This is how all the PE deals are structured with massive debt structures in place where no debt existed before. The non-ESOP firms are being sold the same bill of goods. I guess the firms will all be going public like CBIZ.
Let’s go public BDO! LOL.. probably wouldn’t be the best option but fuk it.. Why not? If bdo goes public, maybe we’ll be acquired down the rest of road and it’ll pay off!? Haha.. I have a better chance of winning the lottery.
The value of the ESOP stock is not a 1-for-1 relationship with the debt. Company performance, which debt is paid down as expected (life is far more than 3 years), is the primary driver of the stock valuation.
If you’re looking for ammunition for concern, I would look to revenue growth. Are they growing as fast as expected when the ESOP began? No.
Wait, so are you not allowed to take an EBITDA addback for potential billable dollars in under-utilized staff? Weird.
I, for one, am shocked. I am utterly shocked at this announcement. Shocked, I tell you. I just can’t imagine how many Benjamins Mr. Berson used to wipe the tears from his face upon hearing this news.
Gotta feel good to get laid off a week before your company completes a $300M acquisition.
It’s all about optics.
Wait BDO is suing you guys?
From what I’ve seen the esop wasn’t really a true esop deal. BDO took out a shit load of debt with really high interest rate and are now struggling. ESOP can work but you can’t straddle the company with this much debt at such a high rate and expect things to go well. Clients are gonna start paying more because the company borrowed all that money.
sounds like a typical esop deal to me. the problem with their structure is they can’t pay the debt down fast enough to increase the diminished stock value after the debt was placed on the firm. i still wonder what kind of projections were shown to the partners that showed how the firm would perform to increase the value of the stock that given out.
Will BDO send you a strongly worded letter for reporting this?
Related to the esop the non big wigs aka “regular” partners were sold a false bill of goods. We were told a bunch of stuff was “easily achievable”and we were pretty much lied to on metrics that could be achieved.