Overview: joining forces

RSM
Robson Rhodes, the mid-tier firm, has found a white knight.

Earlier this year, rumours were circulating about what was going on at RSM.
David Maxwell, its managing partner, had to concede that its strategy was up for
review and various merger proposals were on the cards.

It has now ‘teamed up’ with its US network partner, RSM McGladrey. But many
are still wondering whether this is a merger of equals.

What happened

It’s not been a bad year particularly for Robson Rhodes. The company landed a
major coup in picking up the audit contract for the FSA. Though the regulator
poured cold water on the idea, the move was viewed as an attempt to say to
companies: you can employ mid-tier firms as an auditor.

But even whilst the FSA was declaring its confidence in the firm, there were
questions being asked about its business prospects.

Managing partner Sukhbinder Heer stood down in May. The firm also said that
it was ditching Heer’s goal of becoming a £200m firm, in revenues, by 2007.
Maxwell admitted that one option on the table was asking partners for money.

More recently, when Accountancy Age approached Robson Rhodes about the
possibility of a merger with another firm, a week before its McGladrey
announcement, it flatly denied it. ‘It just sounds like one of those rumours,’
said a spokesperson.

The attempt to ask partners for money now looks like an issue of the past,
with the promise of cash from the US. The firm has been pitching the move as a
question of it ‘joining forces’. Only the financial terms of the deal would
reveal more about that, which the firm is not disclosing.

Robson Rhodes has its share of other difficulties and is currently dealing
with an investigation over the accounting cause celebre of the summer: iSoft.
The Accountancy Investigation and Disciplinary Board is investigating the firm,
which audited the technology company.

What’s going to happen

Robson Rhodes’ 78 Partners have agreed the McGladrey move. All that is left
is due diligence, and the ‘execution of definitive agreements’, according to
RSM’s phrase.

The financial details of the move are still shrouded in secrecy. The firm
would not be drawn on the partnership structure and profit-sharing.

Steve Tait, president of McGladrey, and Maxwell both maintained that they
would only be creating one organisation from a ‘managerial direction’ viewpoint.

It is pledging to challenge the Big Four. The industry will be watching with
interest to see whether such a challenge will be successful.