BDO USA to sign $1.3bn debt deal with Apollo

Senior partners at BDO USA could reportedly receive a big windfall following a $1.3bn (£1bn) debt deal with Apollo Global Management, the Financial Times has reported. 

Sources told the FT that Apollo is providing the debt financing to fund purchases of shares by a new employee trust, as well as to refinance some of BDO’s existing obligations. The trust will reportedly use some of the funds to buy a minority stake in the firm from existing partners. 

The financial restructuring comes after BDO USA abandoned the traditional partnership model in order to secure “tax advantages and greater flexibility”. It legally became a corporation at the beginning of last month, turning its 860 partners into employee-shareholders.

This latest debt deal is said to mark one of the largest deployments of private capital into professional services, and “will be closely watched by the rest of the accounting sector”, the FT said. It comes as private equity groups have “taken a greater interest” in the sector in recent years.

Under the deal with Apollo, ownership of the firm 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. 

In a statement to the FT, BDO said that “much of the private debt that will help fund the creation of the ESOP is not incremental debt but is a refinancing of our current line of credit to take advantage of tax benefits an ESOP offers”. 

It added that ESOP will be overseen by an independent trustee representing the interests of participants. 

BDO added: “We are establishing a new model where everyone that contributes to our success has the opportunity to benefit from it.” 

A source told the FT that a deal was being voted on at a shareholder meeting in Florida that concluded on Friday (11 August), although the vote itself remains open.  

Apollo has been contacted for comment.