Baker Tilly eyes RSM Tenon break-up as it pulls buyout

Accounting firm Baker Tilly announced this morning (22 August) that it would not make an offer for the entire issued share capital RSM Tenon, though it hinted that it may look instead to buy parts of the business as it admitted it was still reviewing an “alternative potential transaction”.

In a statement to the stock exchange, Baker Tilly bosses confirmed they still saw “significant value” in the RSM Tenon group and they would be interested in an alternative transaction “involving an acquisition of part or indeed all of the business of the RSM Tenon group”.

The firm added that it would look at such an option as long as it did “not constitute an offer falling within the jurisdiction of the City Code”.

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Back in July when the takeover talks between the two companies were announced RSM Tenon’s share price plummeted by 34 per cent. Baker Tilly had said that any offer would be in cash, but RSM had warned shareholders that they would see very little return due to its high level of debt. Lloyd’s is the sole banker with exposure of around £80m.

An RSM shareholder holding 5 per cent of the company’s share capital, who did not wish to be named, told FTAdviser last week that shareholders would not except a ‘de minimus’ offer.

According to the results to June last year, RSM’s net debt increased to £78.3m from £68.2m in 2010/2011. Last year the firm made a loss after tax of £88.7m after having made profit of close to £1m in 2010/2011.

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.

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.”