Tenon: calm after the storm

Different year, same story. In February 2003 Accountancy Age ran an
article suggesting Tenon was ripe for a takeover. The share price was down and
there was upheaval among the directors.

Funny that, because in the last few weeks the pages of the very same magazine
have featured almost weekly updates on the prospect of management buyout or a
takeover of Tenon.

Chief executive Andy Raynor and finance director Lesley Spencer are
interested in making an offer for the business, which would mean the group
delisting and going private.

The path appeared clear for the MBO after all the main potential bidders
ruled themselves out.

But a later profit warning came with news that there was ‘considerable
preliminary interest’ from parties other than the in-house team.

So plenty for chairman Neil Johnson (pictured) to think about three years on
from taking the helm at the top 10 accounting firm.

He has this uncertainty to deal with as well as contending with a debt of
around £30m, which is only £13m short of the group’s market cap.

When Tenon was launched six years ago it was said it would change the face of
accountancy – as a listed mid-tier company its business model was heralded as
the way forward. But it wasn’t all plain sailing, and adopting the ‘consolidator
model’ forced the company through a difficult period of change, with partners
becoming employees.

The flotation generated £50m, which was then used to make some acquisitions,
enabling Tenon to grow into a national operation.

But three years into the big experiment, the company hit a crisis. A profits
warning came, the share price crashed and chief executive Ian Buckley, who had
been with the company from the start, departed.

That was where Johnson and Raynor came in, announcing ‘a sea change’ in the
way the company was to be run, with a promise to improve communications and
rebuild the company’s structures.

Johnson certainly came with lots of experience. After leaving the army in
1974 he joined BLMC, part of Rover, to hold various director-level posts.

He later joined the board of Jaguar and had a spell on secondment to the
Ministry of Defence before rejoining the board of Rover. As chief executive of
the RAC he led the demutualisation and sale of the motoring services business.

Johnson and Raynor have stabilised the company and built it into something
much more solid. It would not be fair to say their three years at the helm have
been without success.

But the question now is can they turn things around and reverse the
situation, which the London Evening Standard headlined: ‘Alternative Accountancy
Plans of Tenon in Tatters.’

Whether Tenon can learn from the other AIM-listed firm Vantis is a question
Johnson admits the group has been asking itself. After all, Vantis’ stock market
performance has outshined Tenon’s despite it being listed four places lower in
the Accountancy Age Top 50.

Perhaps the elusive answer has contributed to the need to consider delisting,
and the decision to invite bids, which is one Johnson and Raynor must have found
difficult.

By taking such tough decisions, maybe they will still prove the experiment to
be a success.