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RSM Tenon 2014?

SO THE RSM TENON plot thickens with much speculation over the future of the firm and where it will end the year.

In February, Tenon announced it was unable to reach a new agreement with its sole lender, Lloyds Bank, to “reset” the terms of its lending facility. The biggest problem seemed to be that the banking covenants were for a very different firm to what is now left – following various sales and cost cutting activities.

However, Baker Tilly has appeared as a possible saviour with a potential merger on the table.

As is the case with most listed entities, all information is kept very hush hush, but if a merger were to go ahead investors are likely to receive minimal, if any, return for their share in the firm. Something I feel is a bit harsh, considering the majority of those investors have stuck with the firm through the restating of accounts, senior management departures and a host of shocks and knocks in the last year and a half.

Baker Tilly will see a boost to its client base from a tie up should it go ahead, though the deal is unlikely to test the depth of its pockets. However, as part of the deal, it is hoped Baker Tilly will make good on current debts at RSM Tenon, such as the Bentley Jennison partners who are owed £9.9m.

Last year the firm renegotiated that debt to partners so that it was no longer dependent upon results at Tenon and instead would be paid over a contracted period due to end in September 2015.

Clock is ticking

Baker Tilly has until 5pm this Thursday to make an announcement of whether or not it is making a bid for the firm. 

Given that lending facilities have still not been agreed with RSM Tenon’s lenders, one can’t help but reminisce on Vantis and whether the same fate will apply to RSM Tenon, should Baker Tilly walk away from the discussion.

Vantis collapsed into a pre-pack administration in June 2010. As reported by Accountancy Age, Vantis’ pre-pack was months in the making, with FTI Consulting brought in to look at its books and shadow Deloitte after it was appointed to sell parts of its financial management arm, with interested parties and realistic buyers contacted with a view to offloading its accounting and tax divisions.

Once the then listed Vantis entered into a pre-pack, FTI Consulting practitioners – who were appointed administrators – sold various practices to Vantis’ management and some elements to RSM Tenon. The business advisory division was sold to a collection of partners to create FRP Advisory.

At the time it was speculated this was the best way to safeguard jobs and increase return to creditors, with the lenders collectively owed £54m.

In light of this history you can’t help but wonder, if the deal with Baker Tilly and RSM Tenon goes belly up, what will happen next to RSM Tenon? Will another firm step in? Will there be several buy-outs or sales? Will a pre-pack give Lloyds the return they will be happy with?

Or, will Baker Tilly decide it only wants certain parts of the firm and is not interested in taking on the whole entity, which could spell redundancy payments and cost-cutting expenses. Will this lead to a pre-pack at RSM Tenon with Baker Tilly picking up the parts they want, without having to worry about redundancy payments, and various management buy-outs regionally, similar to the Vantis’ pre-pack?

Although I have watched this story closely I am still none the wiser. I am only sure of one thing, before this year is out a major change will have taken place at RSM Tenon. I await Thursday’s announcement with hopeful anticipation for the best return to shareholders and the staff.

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