BDO partners in line for windfall after $1.3bn debt deal with Apollo Global Management

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Senior partners at the accounting firm BDO USA are in line for a big windfall after the arrangement of a $1.3bn debt deal with Apollo Global Management, according to people familiar with the situation.

The private capital group is to provide $1.3bn in debt financing for a employee-owned vehicle, which will use the money to buy a large minority stake in the firm from existing partners, the people said.

The financial restructuring comes after BDO USA decided to abandon the traditional partnership model used by other large accounting firms in search of tax advantages and greater flexibility.

The firm legally became a corporation at the beginning of last month, turning its 860 partners into employee-shareholders, although they continue to use the term “partner”. The largest shareholdings went to executives at the top of the firm and those with longer tenures.

BDO is the sixth-largest accounting firm in the US by revenue, having grown annual revenues from about $600mn a decade ago to $2.8bn in the financial year just ended, under the longtime leadership of chief executive Wayne Berson.

The debt deal with Apollo marks one of the largest deployments of private capital into professional services and will be closely watched by the rest of the accounting sector, which has typically shied away from loading businesses up with leverage.

Private equity groups have taken a greater interest in the sector in recent years as consolidation has gathered pace. A wave of leveraged buyouts of smaller accounting firms stalled, however, in the wake of rising interest rates and scepticism from regulators and management teams about handing private equity an ownership stake.

Berson told the Financial Times last year that BDO had also considered taking a private equity investment, but decided against it.

Under the transaction with Apollo, ownership of BDO USA will remain in the hands of employees, shared among the partners and a tax efficient retirement savings vehicle known as an employee stock ownership plan, or ESOP.

The deal was being voted on at a shareholder meeting in Florida that concluded on Friday, according to a person familiar with the situation.

BDO’s transformation from a partnership has been hailed in some quarters as a way to increase its financial flexibility at a time when executives are hunting for capital to fund acquisitions and technology investments.

BDO said its leadership “regularly discusses the future of the firm and strategic initiatives and doesn’t comment on these discussions”. Apollo declined to comment.