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Insiders have revealed that senior partners at BDO USA, an accounting firm, are set to receive a substantial windfall thanks to a $1.3 billion debt deal with Apollo Global Management.
Apollo, a private capital group, will provide $1.3 billion in debt financing for an employee-owned vehicle. The vehicle will utilize the funds to buy a significant minority stake in the firm from existing partners, according to sources.
BDO USA has opted to abandon the traditional partnership model used by other large accounting firms in favor of greater flexibility and tax advantages. In the eyes of the law, the firm recently transitioned to a corporation, transforming its 860 partners into employee-shareholders, while still retaining the term “partner”. Executives and long-tenured employees received the largest shareholdings.
BDO, led by CEO Wayne Berson, is currently the sixth-largest accounting firm in the US by revenue. Over the past decade, the firm’s annual revenues have grown from around $600 million to $2.8 billion in the most recent fiscal year.
The debt deal with Apollo represents one of the largest injections of private capital into professional services. The rest of the accounting sector will closely observe this development, as it has historically avoided high leverage.
In recent years, private equity groups have taken an increasing interest in the accounting sector due to consolidation. However, leveraged buyouts of smaller accounting firms have slowed due to rising interest rates and reluctance from regulators and management teams to give private equity ownership stakes.
Berson mentioned in an interview with the Financial Times that BDO had considered a private equity investment but ultimately rejected the idea.
Under the transaction with Apollo, ownership of BDO USA will remain with its employees, distributed among the partners and an employee stock ownership plan (ESOP), a tax-efficient retirement savings vehicle.
A shareholder meeting in Florida took place to vote on the deal, which concluded on Friday, according to insiders.
The transition of BDO from a partnership to a corporation has been commended by some, as it enhances the firm’s financial flexibility for pursuing acquisitions and technology investments.
When asked for comment, BDO stated that its leadership regularly discusses the future of the firm and strategic initiatives but refrained from commenting on specific discussions. Apollo declined to provide a comment.
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