BDO USA is a leading accounting and advisory firm in the United States, with more than 75 offices across the country and over 12,000 professionals. The firm provides business leaders with insight driven perspectives, as well as assurance, tax and advisory services.
The Need:
BDO was exploring options to continue investing in its sustainable future. The firm had several goals, including enhancing recruitment and retention efforts, supporting organic and acquisition growth, and continuing to build a purpose-driven, people-first culture focused on quality. While private equity firms had begun to show signs of increased interest in accounting and advisory firms, BDO’s leadership was keenly focused on protecting the unique culture they’d built over several decades.
BDO’s leaders believed that establishing an Employee Stock Ownership Plan (ESOP) was an attractive option that would enable them to remain independent while working toward their goals. The feasibility of establishing an ESOP was initially unclear because of the firm’s unique nature; however, it was clear that the transaction could not be accomplished under a traditional bank financing structure.
The Solution:
PNC had been one of BDO’s primary banks for years. Through efforts driven by the company’s relationship team, PNC established itself as a trusted advisor over its 20-year relationship with the firm. “When BDO came to us to talk about how to transition to an ESOP from a financial standpoint, our preliminary feedback was that it did not fit the traditional banking structure, but we were willing to explore approaches,” says Michael Crowe, SVP, Corporate Banking team lead, Illinois. “We started by bringing PNC Business Credit and ESOP Solutions into the conversation, which was critical in our success.”
To effectively fund the ESOP, BDO required a private credit solution that could provide more financing than the traditional bank market could support. The firm also needed a strong banking relationship that could support its working capital and other critical banking needs.
Working with the existing relationship team and PNC’s ESOP Solutions group, PNC Business Credit leveraged its experience with private credit to provide a revolver in a unitranche structure with the firm’s chosen private credit partner to support the ESOP transaction and the ongoing operating needs of the company. BDO made the qualifications clear: it not only needed a strategic banking relationship that could support working capital and traditional banking needs, it also needed ESOP and advisory capabilities to support the future vision of the business.
“Historically, BDO had very strong banking relationships, but to accomplish the ESOP transition, they needed to add a non-bank relationship,” says Brian Caldwell, head of originations, PNC Business Credit. “Over the past several years, PNC Business Credit has built partnerships with private credit, rather than working in competition with them. Our solution involved the bank partnering with that private credit partner, which provided BDO with everything it needed.”
This transaction was the first of its kind for the accounting profession in terms of scale. The ultimate financing structure required coordination among several PNC Corporate and Institutional Banking groups, including Business Credit, Debt Capital Markets, ESOP Advisory team, and Treasury Management, as well as third-party financing sources and advisors.
“Our willingness to be more open-minded about financing, as well as building strategic relationships with all the teams needed to accomplish the goal, led to success for BDO,” Crowe says.
“BDO has made a significant commitment to our culture by establishing an ESOP. We are proud to be among the largest ESOP’s in the country and the first large accounting and advisory firm to embrace a beneficial employee ownership model,” says Steve Ferrara, BDO USA’s now-retired Chief Operating Officer. “This is a significant milestone in the firm’s 113-year history, and I’m so glad we were able to lean into the knowledge of the PNC team. They truly brought unique insight and perspective to help us shape this transaction.”
The Results:
In August 2023, BDO USA became the first large accounting and advisory organization to establish an ESOP. This innovative approach allows the firm to empower its employees and serve clients through a model that encourages an ownership mindset. It also supports BDO’s recruitment and retention efforts, as well as helps the firm better compete for future acquisitions in order to continue fueling its growth. By collaborating with PNC for working capital and treasury management, BDO can also continue to meet its operating needs with a flexible capital structure.
Achieving BDO’s goals required PNC to “leverage every ounce of our financing capability and our relationships,” Crowe says. “It’s a great example of what we try to do every day to meet the needs of our clients.”
