Shares in RSM Tenon slumped 30% yesterday afternoon following the announcement the firm was in discussions with Baker Tilly over a potential take-over bid.
RSM Tenon's share price closed the day at 2.25p to give it a market capitalisation of £7.26m. It made a pre-tax loss of £7.5m for the six months to 31 December 2012.
Two years ago the firm's shares stood at 67p, but RSM Tenon went on to experience major difficulties in 2012, announcing at the start of the year it would be restating its accounts for the year ending 30 June 2011 after discovering 'black holes' in its books. As a result it ended up restating the previous year's pre-tax profit by £12.1m.
It went on to report a pre-tax loss of £83m in the six months to 31 December 2011, which it said was largely due to exceptional items relating to a £63.7m goodwill writedown and the costs of a dispute with its professional indemnity insurers over a £4.3m FSA settlement dating back to 2010 for missold Lehman-backed structured products and unsuitable pension switching advice.
Previous chief executive Andy Raynor and chairman Bob Morton left the firm at the beginning of 2012, with the company taking a 27% hit to its shares. Last October, it announced it had cut 400 jobs as it posted a pre-tax operating loss of £101.8m.
RSM Tenon's cost saving plans, including the 10% drop in headcount, have produced a reduction of around £20m in annual costs. New chief executive Chris Merry also sold the firm's personal insolvency division to Grant Thornton, and in March this year Dentons Pension Management bought RSM Tenon's SIPP arm, Pension Trustees for an undisclosed sum.
In a statement released on 25 July, Baker Tilly confirmed that it is reviewing the potential opportunity of making an offer for RSM Tenon. Under stock market rules, it has until 22 August to make an announcement about whether or not it will go ahead. Any bid would require the support of Lloyds Banking Group plc, RSM Tenon's sole lender.
Shares in Begbies Traynor, the only other listed Top 60 accountancy firm, were largely unchanged yesterday, closing at 34p. Its results for the year ended 30 April 2013 showed pre-tax profits had halved to £ 2.4m compared with £5.5m in 2012, while revenues had declined 12% to £51m.
However, Begbies Traynor executive chairman Rick Traynor pointed out that the firm had reduced its net debt significantly from £27.3m as at 31 October 2011 to £17.2m as at the year end. It had also negotiated £35m of new debt facilities and Traynor said the group was in a strong financial position and able to consider 'making organic investments and selective acquisitions'.
