Firm focus: BDO Stoy Hayward - The future is bright

BDO managing partner Jeremy Newman is planning a lively future for the mid-tier firm based on the solid foundations of high growth figures and some prestigious assignments. Chris Quick reports.

'The challenge for us,' says BDO Stoy Hayward managing partner Jeremy Newman, 'is to be slightly less grey - to find a proposition that is slightly different, that sets us aside.'

As he says this, the stripy, multicoloured tie he is wearing for his interview with Accountancy seems to glow more vividly as if to counter the mere suggestion of greyness.

Not that grey is a description you would attach to Newman, who joined the firm as a trainee in 1978 and was made managing partner in 2001. He is enthusiastic, ebullient and bullish about BDO's performance, which is perhaps not surprising given recent events.

In May he announced half-year results showing a 25% hike on the previous year and plans to add 500 more staff to the firm's 2,600-odd headcount over the next two years.

Then there is BDO's crowning last year as the only non-Big Four auditor of a FTSE 100 company on the flotation of its client PartyGaming. And it was the only accountancy firm to feature in the main list of the Sunday Times 100 Best Companies to Work For survey (it was 19th), which was revealed in March.

Not to mention the prestigious and lucrative assignment from the Department of Trade and Industry last year to investigate the collapse of MG Rover, which is ongoing, and the pending move of the firm's London offices to the snazzy redeveloped former Marks & Spencer building a short walk down Baker Street from its current HQ. The firm has also completed a rationalisation of its national office structure, combining 33 offices into 15.

Newman says the firm's full-year results, for the year to 30 June, will show growth 'north of 20%', of which only about 5% is attributable to BDO's acquisition of three Numerica offices last summer. The rest is organic. Newman says there are no current plans for any more acquisitions, although the firm would look at any opportunities as they arose.

Spurs for growth

So is all this down to the good market for accountancy firms at the moment, or is BDO meeting Newman's 'less grey' challenge and coming up with a winning proposition?

'If you had asked me six months ago I would have said that the marketplace at the moment is relatively benign for decent mid-tier firms. The Big Four have focused on the larger global stuff and put their resources into Sarbanes-Oxley, and have tended to neglect the larger mid-corporates, which perhaps would be their smaller corporate clients.' He emphasises that this 'neglect' is not overt, but rather a result of resource constraints.

But Newman has now changed his view: 'Not because I don't think that is the case in terms of the Big Four, but if you look at other mid-tier firms they are clearly not enjoying the same rates of growth that we are. If the market was growing at north of 20% then all the other firms would also be growing at north of 20% and they are not.'

He is right - mostly. BDO's growth rate is the highest of its close rivals, although some firms show higher growth mainly as a result of acquisition activity.

The secret of the firm's success, according to Newman, is its attitude towards and treatment of its staff and partners. 'If you are going to teach each of your people to perform at 5% or 10% more than you thought they were capable of, then you've got a brilliant business. If you get your people merely to perform at the level they are capable of delivering, then you are solely dependent on the quality of people you have got in your business.'

Attracting and retaining people, he says, is not necessarily about work/life balance - a phrase he dislikes - but about engaging with people as individuals, rather than as a commodity. Getting people to tell you what they want, acting on it, and recognising that they have differing aspirations - and offering excellent training and development.

He gives the example of a partner who has recently returned from climbing Mount Everest. 'There are some places he could have worked where he couldn't have done that because he would not have been given the time to do it. But you can bet your bottom dollar that he will now work a shedload harder and be much more committed than would otherwise have been the case.'

Newman agrees that the job market is tight but says the firm is still being reasonably successful in recruiting people, who come from a variety of places - some from the Big Four. 'I think they are sick of being treated as a commodity and want a bit of balance back in their lives,' he comments.

Oxera opportunities

It's not just on recruitment issues that BDO has come under the spotlight when it comes to competition with the Big Four.

Publication of the Oxera report in April, which explores why the Big Four have the large listed company audit market pretty much sewn up, has led to much discussion about the mid tier's enthusiasm for large company audits. Naturally, much attention has been focused on BDO, and its slightly larger rival Grant Thornton, the two biggest firms outside the Big Four.

Newman says that Oxera gives BDO an opportunity to engage more heavily with finance directors and non-executive directors in the FTSE 350, whose perceptions of auditors outside the Big Four may be improved by the report. But he does not expect radical change as a result. 'As a target I have said that we need to get the number of FTSE 350 audit clients into double figures - we've got half-a-dozen or so now.'

He emphasises, however, that the firm's tax partners already have significant numbers of clients in the FTSE 100 and FTSE 350. 'The most sparkling element of our business at the moment is our tax practice. That's the fastest-growing element.' The fact that, in contrast to the situation with auditors, FTSE companies don't have to disclose their tax advisers has probably helped this, he says. He also argues that the firm has benefited at the expense of rivals that have historically been more involved in esoteric planning schemes and packaged tax schemes, which have suffered under the chancellor's anti-avoidance crackdown.

Assurance is doing well and he describes the performance of the firm's corporate finance department as 'stunning'. 'The corporate finance market is fairly buoyant and I believe it will remain so,' he says. London's capital markets, he observes, are benefiting from the UK's lighter touch regulation, especially compared with the US. And private equity investors over the last few years will be needing exits.

So are there any clouds on the horizon? 'The biggest issue we face is the extent to which the Big Four will choose to re-engage with the mid-corporate marketplace,' he says.

'That might not happen if they get wrapped up with their new consultancy businesses - or whatever the appropriate phrase is. If they invest so much time in that and they start to get their relative growth there, they will leave the mid-corporate market to us. Nevertheless, I think there will be an element of re-engagement with them.'

Audit £89.3m
Tax £78.8m
Corporate recovery £31.3m
Corporate finance £35.3m
Forensic £24.3m
Wealth management £16m
Total £275m

(Due to the timing of Accountancy's publication, BDO has estimated its annual figures to 30 June 2006)

Annual fee income: £275m*
No of UK offices: 15
No of partners: 225
No of female partners: 16
No of staff (excluding partners): 2,600 (approx)
No of trainees: 420 (approx)

* This is an estimate for year ended 30 June 2006


Most recently available annual fee income

Ernst & Young £945m
Grant Thornton £284m*
BDO Stoy Hayward £275m*
Baker Tilly £184m
Smith & Williamson £137m

* Estimated for year ended 30 June 2006


1903 Fred Stoy founds Stoy & Co

1919 Jack Hayward joins him. After the Second World War, Stoy Hayward & Co relocates to London's West End and develops client base in emerging industries, notably retail and property

1992 Merger with Finnie & Co

1994 Union with 13 BDO Binder Hamlyn offices, changes name to BDO Stoy Hayward, joins BDO International

2002 Becomes single national partnership

2004 Converts to LLP status.

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