25 Jul 2013 05:14pm

RSM Tenon and Baker Tilly in merger talks

RSM Tenon has announced it is in discussions with Baker Tilly over a possible merger between the two firms

In a statement to the Stock Exchange this afternoon, RSM Tenon said the discussions “may or may not lead to an offer being made for the entire issued share capital of the Company.”

It said it has been providing information to Baker Tilly to help them “facilitate their investment evaluation process”.

The statement goes on to add that “given the level of debt within the Company, any potential transaction would require the support of its sole lender, Lloyds Banking Group plc. As a consequence, the Board considers that, if an offer is made, it is likely to be at a level which is significantly below the current market price of the ordinary shares of the Company.”

Under City merger regulations, Baker Tilly has just under a month to confirm if it wants to make a takeover offer for RSM Tenon, or confirm it will step away from the talks. The deadline is 5pm on 22 August.

In its latest update to the market in May, RSM Tenon said an award of £5.5m would push its accounts into exceptional profit of approximately £2.8m for 2013. However, it warned it was still in talks with its lenders about resetting its banking facility, and said its full-year EBITDA would be towards the “lower end of management expectations.”

In January, Baker Tilly International posted a healthy 3% revenue increase worldwide for its last financial year, with European revenues up 8% on the year.

Shares in RSM Tenon plummeted by 30% on the announcement, giving the firm a market cap of £7.26m at the close of trading. 

In its interim management statement  in February , RSM Tenon said its revenues for the six months to 31 December 2012 were £88.4m (down by £9.8m on the previous year), and the firm’s headcount had been reduced to 2,666 employees. Baker Tilly, the eight largest accountancy firm in the UK, achieves revenues in the region of £171m, similar to RSM Tenon, with approximately 1,600 UK employees.

A merger between the two would be a continued consolidation of the mid-tier market, following the BDO/PKF merger which completed earlier this year. The revenues of the new combined firm will near £400m, closing the gap with its nearest rival Grant Thornton, which posted revenues of £417m last year.

Helen Roxburgh


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