Rivals clear the way for Tenon MBO

Andy Raynor’s MBO team seem are poised to take over Tenon

The path was cleared for Andy Raynor’s Tenon management buy-out team this
week, as the main potential bidders for the listed accounting firm ruled
themselves out of a bidding war.

Chief executive Andy Raynor and finance director Lesley Spencer announced
their plans to pursue an MBO a fortnight ago, prompting Tenon’s stock price to
rise from 24.5p to 29.5p.

But since then Tenon’s share price has levelled off and leading suitors
Vantis, BDO Stoy Hayward, PKF and Grant Thornton are now counted out of
challenging Raynor’s MBO team.

BDO managing partner Jeremy Newman said his firm was not interested in buying
Tenon, while a spokeswoman at fellow mid-tier firm PKF said it ‘had not been
approached and was not interested’.

A Grant Thornton spokesman said that the UK’s fifth largest firm was ‘always
considering opportunities’, but added that it was not involved in any
negotiations with Tenon.

Ben Archer, an analyst at Vantis’ house broker Charles Stanley, meanwhile
said that Tenon’s AIM rival was highly unlikely to pursue an acquisition as it
was still bedding down its £3m purchase of nine Numerica offices.

‘I don’t see another deal in the short term. The Numerica deal was bigger
than Vantis would normally do, but it was too good to walk away from. Vantis is
focused on integrating Numerica and will then pursue smaller bolt-ons as its
track record suggests,’ Archer said.

One factor believed to have dissuaded bidders is a £27m debt Tenon carries on
its balance sheet, which is only £13m less than the group’s market cap.

‘There are no obvious potential bidders for Tenon, and although you can never
say “never” Tenon’s debt of around £30m is a sticky issue,’ said Andrew
Shepherd-Barron, a Tenon analyst at KBC Peel Hunt.

Although the debt may have put off outside buyers, it is unlikely to derail
the efforts of the MBO group. Generally the debt of a target company is factored
into the plans of a management team.

‘New funders do take a company’s debt into consideration, but it is worked
into the price an MBO team will pay,’ said Mark Pacitti, corporate finance
partner at Deloitte.