RSM Tenon reveals buy-out talks with Baker Tilly

RSM Tenon, the UK’s only listed accountancy practice, yesterday revealed it was in takeover talks with mid-market rival Baker Tilly.
RSM Tenon is valued at around £10m. Picture: GettyRSM Tenon is valued at around £10m. Picture: Getty
RSM Tenon is valued at around £10m. Picture: Getty

Any deal – which would come amid increasing consolidation in the sector – would create one of the UK’s biggest accountancy firms with fee income of more than £370m.

But shares in RSM Tenon, which has offices in Aberdeen, Edinburgh and Glasgow and is recovering after a torrid 2012, plunged on the announcement after it also said that its hefty debt pile meant any potential transaction would require the support of its sole lender, Lloyds.

Hide Ad
Hide Ad

“As a consequence, the board considers that, if an offer is made, it is likely to be at a level which is significantly below the current market price of the ordinary shares of the company,” it warned in a statement to the stock market.

It said it had been providing “certain information to Baker Tilly to facilitate their investment evaluation process”.

RSM Tenon, which said the approach was unsolicited, said yesterday’s announcement did not amount to a firm intention to make an offer and there can be no certainty that an offer will be made.

Baker Tilly confirmed that it was “reviewing the potential opportunity of making an offer for RSM Tenon”.

RSM Tenon recently said revenues continued to be under pressure after a difficult period for the company. It lost its chairman and chief executive in 2012 and posted losses of £100m after uncovering a black hole in its accounts.

It also said discussions were continuing with Lloyds to avert the risk of a breach in its banking facilities over the next 12 months.

Latest figures for the firm show it had net borrowings of £80.4m at the end of 2012.

Interim results showed operating loss had been cut from £10.9m to £600,000 and the pre-tax loss from £83m to £7.5m.

Hide Ad
Hide Ad

A deal between the two firms would represent the latest consolidation in the accountancy sector as mid-market firms look to build scale and narrow the gap on the Big Four.

According to latest figures from Accountancy Age, RSM Tenon is the seventh largest accountancy practice in the UK with £207m of fee income in 2013 and 219 partners.

Baker Tilly, which also has offices in Edinburgh and Glasgow, is in ninth position with £171m of fee income and 107 partners.

A deal would see a combined firm compete closely with BDO which is currently in sixth spot and which itself merged with PKF earlier this year.

RSM Tenon has been involved in a number of high-profile insolvency cases in Scotland in recent months.

In June it was appointed administrators to Caithness Stone Industries which supplied stone to projects including the Scottish Parliament.

The firm was also appointed administrators at specialist engineering business Mowat Technical & Design Services in Caithness. It later sold the business to one of Mowat’s customers with all jobs saved.

The Scottish accountancy sector has seen a string of merger and takeover deals among smaller firms over the past 18 months including Johnston Carmichael’s tie-up with Aberdeen based Ritson Smith and French Duncan’s combination with with Macfarlane Gray.

Shares in RSM Tenon closed down 30.6 per cent, or 1.05p, at 2.38p. The company is valued at around £10m.