RSM Tenon share prices plummeted by 34 per cent yesterday (25 July), to close at 2.25p, after it revealed it was in takeover talks.
Baker Tilly has until 5pm on 22 August to decide whether it intends to make a firm offer, but RSM Tenon stated its debt levels meant any deal would be “significantly below” the current share price.
The deal would also require the approval of its sole lender, Lloyds Banking Group, due to RSM Tenon’s current debt levels.
RMS Tenon’s books have taken a beating in recent years due to the company pushing structured products backed by Lehman Brothers.
The business won a £5.5m payout in March this year after an arbitrator ruled its insurers should pay the costs of disputing a Financial Services Authority fine from 2010.
The FSA fined the company £700,000 for failures in its advice and sales processes involving structured products backed by Lehman Brothers.
A dispute arose between the firm and its insurers over whether the fine was covered by RSM Tenon’s professional indemnity insurance, which was eventually referred for resolution by confidential arbitrage.
The arbitrator ruled that RSM Tenon should receive £5.5m reimbursing costs resulting from the fine, which the company has said will result in exceptional profit for 2013 of about £2.8m.
At the time of winning the ruling, Chris Merry, chief executive of RSM Tenon, said: “We continue to make good progress in restoring RSM Tenon to operating profitability and to consolidate the business turnaround.
“The market for our services remains highly competitive and I am grateful to our clients and staff for their continued support.”