RSM Tenon in merger discussions with Baker Tilly

by Rachael Singh

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25 Jul 2013

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RSM Tenon

RSM TENON has announced that it is in discussions with Baker Tilly over a possible merger.

The firm today announced that current negotiations may or may not lead to an offer being made for the entire issued share capital of the firm.

The company has been providing Baker Tilly with information to look at an investment.

Earlier this year, RSM Tenon announced it was unable to reach a new agreement with its sole lenders Lloyds Bank to "reset" the terms of the lending facility, however, at the time it added that discussions were ongoing.

In February's interim results RSM Tenon said the covenants on its credit facilities were set and based on a larger firm than it now operates. Unless a reset was achieved it was likely to breach its covenants in the forthcoming 12 months.

In the latest announcement it said that any transaction would require the support of its sole lender and as a consequence the board considers that, if an offer is made, it is likely to be at a level that is "significantly" below the current market price" of the shares.

RSM Tenon added that the announcement "does not amount to a firm intention to make an offer and accordingly, there can be no certainty that an offer will be made".

RSM is looking to relocate about 600 staff in its London office after the local council granted planning permission to remodel the building it currently occupies. It is expected that work will commence next year. 

In the latest Accountancy Age Top 50 survey RSM Tenon had a fee income of £207m, a 12% decline on the year before. Baker Tilly were unable to submit new fee income but re-stated its 2012 figures of £171m for the year ended 31 March 2012.

Baker Tilly also confirmed that it was reviewing the opportunity of a merger.

"This review is not yet complete and there can be no certainty that an offer will be made for RSM Tenon nor as to the terms on which any offer may be made."

Baker Tilly added it would make an announcement on or before 22 August as to whether or not it intended to make an offer for listed firm RSM Tenon.

If the merger were to go ahead many believe it will make sense for both firms, however, it will be difficult to achieve.

"The merger of these two firms makes a lot of sense strategically," said Reeves' corporate partner Fiona Hotston Moore

"It would result in a third significant firm in the tier below Big 4. However completing this transaction is going to be very challenging and probably one of the toughest in the accountancy profession."

RSM Tenon's shareprice has slumped more than 50% in the last week. according to the Share Price Centre


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