Following the expulsion of its former Hong Kong firm, Grant Thornton China has set up a new firm in Hong Kong, Jingdu Tianhua Hong Kong. Late last month, partners and staff of the old firm announced an agreement in principle to join BDO Limited Hong Kong.
The new firm will be led by a group from the former firm under the leadership of Daniel Lin. The firm will be strategically integrated and aligned with Grant Thornton International’s (GTI) China firm and will have access to, and the support of, 60 partners and more than 1,500 staff in its mainland China firm.
Ed Nusbaum, CEO of GTI, told AccountingWEB that the previous member firm, Grant Thornton/Hong Kong, was told to leave in September when its contract was terminated because it did not agree with GTI’s global strategy.
“GTI needs to build a new platform for service to our multinational clients in both Hong Kong and the Peoples Republic of China, with the leadership in Beijing, and the member firm did not share that vision. This was not a sudden decision. It was part of a well thought-out plan of action,” Nusbaum said.
“We were responding to changes in the marketplace. Most of our clients are multinational and we need to be committed to a very cohesive, consistent approach, to seamless service,” Nusbaum said.
The agreement in principle with BDO by partners and staff of the former firm does not constitute a merger of the two firms, “nor does it indicate a decision by GTI to leave Hong Kong,” said Hilary East, head of International Communications for GTI, contrary to reports in the Hong Kong media and The Wall Street Journal.
"Grant Thornton is not pulling out of Hong Kong. Quite the opposite,” East told AccountingWEB. “We have established a new firm. The new firm will adopt the Grant Thornton name once it becomes available.
“The 600 partners and staff in our former Hong Kong firm have not 'jumped ship' to BDO as suggested by the South China Morning Post,” East said. “Press releases announcing both the termination and the new member firm are available on the gti.org Web site
GTI gave the member firm six months to leave, to minimize disruption to the firm's clients and to facilitate an orderly and professional exit.
“Regrettably, the actions and public statements of the exiting firm have shown little regard for client care,” East said. “We are dismayed that so many long-standing clients of Grant Thornton have been treated in a way that falls well below the standards we would expect.”
Nusbaum acknowledged that there would be short-term pain, “including in terms of revenue.”
“These were very good people and we wish them well, but we were uncomfortable with the parochial attitude of Hong Kong. They were having difficulty evolving into what might be called the new normal in China,” Nusbaum said.
“We need to have a commitment to our global strategy from all of our member firms. We are making changes in some other countries as well – through acquisitions, merging some firms and asking others to leave,” Nusbaum said.
“In Germany, for example, some of our seven member firms did not even use the name and were not really national firms. We picked one firm, which then merged with several other firms to build a major force. In Cape Town we just acquired BDO and tripled the size of our office," Nusbaum said. "But it is not about size, it is about growing as one firm with a consistent, seamless, global approach. It is very exciting.”
East told AccountingWEB that "many clients of our former firm have been in contact with Daniel Lin and his colleagues to discuss their options. We hope and expect that many will decide to stay with the 'one firm' approach of Grant Thornton. We expect the Hong Kong firm to have a staff of its own of around 150 by spring 2011. This will almost certainly include partners and staff from our former firm, many of whom are already in contact with us.”
Aside from increasing payroll, BDO isn’t paying anything to acquire Grant Thornton’s client list and staff, which will increase the size of BDO Hong Kong to about 1,100 employees and 70 partners, The Wall Street Journal reported.
“There is no goodwill payment of any kind,” Albert Au, chairman and CEO of BDO Ltd., told local media, the Journal reported. “I like to think they are voting with their feet. By that, I mean they think they’re joining a platform they have commitment to and believe in.”