RSM Tenon investors ‘wiped out’ in Baker Tilly deal

Picture: Bill Henry

Picture: Bill Henry

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Shareholders in RSM Tenon, the UK’s only listed accountancy firm, have seen the value of their investments wiped out after the company called in the administrators.

Lloyds Banking Group, the firm’s sole lender, is also facing a substantial hit, but no job losses are expected among Tenon’s 2,300 employees after rival Baker Tilly – which ruled out a bid for the company’s shares – stepped in to buy its operating subsidiaries for an undisclosed sum.

The “pre-pack” deal, overseen by administrators from Deloitte, comes less than a month after Baker Tilly revealed it had made an unsolicited approach for debt-laden Tenon, and shareholders were warned last week that they stood to gain little if a deal went through.

In an update to the stock market today, Baker Tilly said it would not be pressing ahead with an offer for Tenon’s entire issued share capital, and its target’s shares were suspended from trading. A subsequent statement from Tenon said that Clare Boardman, Nick Edwards and Matt Smith of Deloitte had been appointed as joint administrators and had agreed the sale of Tenon’s trading entities.

The deal comes amid increasing consolidation in the sector, following BDO’s merger with PKF earlier this year, and needs the all-clear from regulators and Baker Tilly shareholders. Smith said this should be “a formality”.

He added: “We believe the proposed sale to Baker Tilly represents the best outcome for the RSM Tenon group.

“The management of the group have stabilised the business, returning it to profitability over the past 18 months and making this transaction possible to secure its future.”

Tenon, the UK’s seventh-largest accountancy practice, had struggled to recover after revealing a black hole in its accounts last year. That pushed the group to a £100 million loss and led to the departure of its chairman and chief executive.

The firm has 35 offices across the UK, including sites in Aberdeen, Edinburgh, Glasgow, Grangemouth, Inverness and Perth. It generated a fee income of about £200m last year, compared with £171m at Baker Tilly, which has 25 offices, including branches in Edinburgh, Glasgow and Lerwick.

Net debts at Tenon rose to £80.4m by the end of last year, up from £78.3m a year earlier, and the firm was forced into appointing administrators after Lloyds said it would not be extending a financial lifeline.

A source said it was a “seriously tense time” for hundreds of Tenon staff, although the administrators stressed that no job losses were expected as a result of the acquisition, which is expected to be completed within two weeks.

Baker Tilly, which has 1,600 staff, described the deal as an “excellent outcome” for Tenon’s workers and said the firm’s profitable trading businesses, “free from the burden of the group’s historic debt obligation”, will continue to offer audit and accounting services to clients.

Managing partner Laurence Longe said: “Combining our strengths and skills will provide us with new opportunities for growth, as well as further strengthening and expanding our offering to the market.”

The administrators said the terms of today’s deal mean Lloyds “will not recover its secured debt in full”, but the state-backed lender has provided financial backing for the acquisition, which has already secured support from a “sufficient majority” of Baker Tilly shareholders.

A spokesman for Lloyds said: “The outcome delivered will safeguard the employees’ jobs and we will continue to assist the administrators as they execute their duties.”

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