RSM Tenon expansion plans on hold after merger

Once bitten twice shy, RSM Tenon’s Andy Raynor might say. The AIM-listed firm that pioneered the consolidator model struggled to bring together its host of acquisitions up and down the country in the early 2000s but is now putting its sole focus into making sure its biggest acquisition, Bentley Jennison (BJ), goes to plan rather than overstretching the firm.

After posting its latest interims, where Raynor revealed there was financing headroom, he insisted that the BJ integration was of utmost importance, rather than further acquisitions.

Three months into an 18-month process of bringing the two firms together,
Raynor suggests that other deals would have to be irresistible to divert away from current efforts.

“We’ll keep a steady ship”, he told Accountancy Age – and at the time that BJ is integrated, the firm will look at other potential deals.

So what shape is RSM Tenon in, what hurdles does the firm face in bringing the £76m acquisition into the fold and where does the future lie for the expanded business?

The firm posted profit before tax and exceptional items of £8.8m for the six months ending 31 December 2009. Its tax bill for the period was £2.2m, while exceptional costs relating to its acquisition of Bentley Jennison and an FSA investigation into its financial services arm pushed its profit down to £1.2m.

Raynor admits that exceptional costs around the merger would continue to impact on the firm’s bottom line for the near future.

Turnaround and corporate recovery revenues rose to £23.2m for the period,
from £19.3m a year earlier.

The BJ offices acquired in Birmingham, Bristol and Leeds would be the focus for growth in the service line.

“We will recruit strongly in those areas,” said Raynor.

And, just for good measure, it will be seeking a listing on the main market in the first half of 2010 to enhance its profile and capital raising opportunities.

The firm predicts that the business recovery market will stay strong for two to three years, and it’s focus at the lower end of the market will see it pick up market share when the economic recovery sees work dry up for others.

Service lines have been restructured to incorporate BJ’s strength in risk management – having its own service line in the discipline. Financial management will incorporate pension arrangements for the private sector, public sector and individuals.

But with Tenon’s strong local focus on entrepreneurs, how does acquiring an international network moniker aid the business?

Quite simple, according to Raynor. Most entrepreneurs and budding businesses are looking to expand with international markets easier to access than ever before. International business clients within the RSM network will also drive business back through to RSM Tenon.

There have been teething problems. Office overlaps will lead to some, as yet undefined, closures. Tenon’s quirky but recognisable entrepreneurial-based branding has disappeared, and its head of national tax Andrew Jupp left rather abruptly in February.

At least on the rebranding front there is some progress. Its analyst briefing documentation contains images of green shoots and the strapline “realising the growth potential”.

Settling on an IT infrastructure will be critical, as will buy-in from staff.

RSM Tenon has been here before, but then, as one big retailer would say, “this isn't just an acquisition, this is a mega-acquisition”.

The firm’s struggle to integrate disparate businesses in 2001 and 2002 saw its share price crash to a 6.25p in 2003. This also coincided with very tough market conditions after the dotcom crash.

Trading conditions aren’t exactly easy at the moment, but with revenues and margins stable – and the small matter of a £75m credit facility barely half-utilised alongside other finance raising – the next 12 months will reveal if the firm has learned lessons from the past.

Further reading:

tenongroup.com/en/investor-relations