Countdown to launch

RSM Tenon was once a troubled accountancy consolidator. But, in May, chief
executive Andy Raynor will take the business through the process of becoming the
first accounting firm to list on the main board of the London Stock Exchange.

What’s happened?

Tenon has a very colourful past. The most significant of the so-called
accountancy consolidators, it was once on life support and looking like it
wouldn’t pull through. Then there was the time the board looked like they would
lead a management buyout. But didn’t. So the business has had it ups and downs.
Last week, however, Tenon said it would give up its place on the Alternative
Investment Market to become a member of the main board. Who would have thought

Tenon was launched with much fanfare in 2000, having raised around £50m to
travel the country buying up accountancy firms. The celebrations did not last
long. By 2003 the share price had plummeted, the launch chief executive Ian
Buckley had stepped down and the business was under new management with Raynor
in the CEO’s chair. It also acquired a new major shareholder in Southwind, the
investment vehicle for the Morton family overseen by Bob Morton. The same Morton
who recently became chairman after denying seven years ago that he was
interested in such a role.

In 2006 the news was about the possibility of a management buyout and
disappointment over share price performance. More recently though, all the work
in rebuilding, reorganising and reenergising the business has culminated in the
£76m takeover of RSM Bentley Jennison.

What happens next?

Raynor will need to face the pressures being on the main board will bring.
Increased coverage and attention from analysts, greater turnover of shares,
demanding investors.

He is bullish. He believes the business is prepared to face all that. A
recent round of analyst presentations have been met with a healthy response and
trading volumes of shares have improved.

Like most firms, Tenon has had a bumpy recession. Turnover dropped £10m to
£150m for the year ending June 2009. There was also the small but embarrassing
matter of being fined £700,000 by the FSA. But analysts are optimistic and
expect a recovery in revenue to £190m when 2010 closes and forecast £240m for
2011. Growth at that rate could potentially take the firm from its number nine
spot to be the seventh largest firm in the country. Macqaurie analysts expect
Tenon shares to grow from the current price of around 46p to 75p in the next 12

All these plaudits could go to a man’s head. Especially after the travails
that Tenon and Raynor have faced. Hailing from Rotherham, Raynor comes across as
relaxed but on top of the detail. His biggest risk is complacency. Though
pleased overall with recent performance, some of the analysts were concerned
that some service lines did not improve more. That will be the job now –
ensuring the company is firing on all cylinders.

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