Baker Tilly's move on top 10 accountancy firm RSM Tenon has ended in the latter finally falling into administration and then having its trading entities ultimately acquired in a pre-pack sale.

As a listed company, RSM Tenon (fee income of £208m; 2011: £228m) had to make an early announcement that takeover talks were going on, which in other circumstances would not have been public knowledge so early.

Baker Tilly appeared to pull out of the acquisition on the deadline day of 22 August, but did not rule out any future purchase of specific parts of the firm, hinting that it could still look to buy off profitable arms.

Then, within hours, RSM Tenon admitted it would not be able to meet its loan obligations to its lenders Lloyds and Deloitte was appointed administrator and immediately announced a sale of Tenon's trading entities to Baker Tilly. London Stock Exchange (LSE) confirmed that Matt Smith, Nick Edwards and Clare Boardman of Deloitte had been appointed joint administrators to RSM Tenon. They have also been appointed to Premier Strategies Ltd, a subsidiary entity which historically provided tax advice, but ceased selling new business in March 2012. The shares were suspended with immediate effect.

RSM Tenon said that the terms of the sale agreement means that Lloyds will not recover borrowings of £80.4m in full. However, the acquisition will receive financial backing from Lloyds TSB Bank plc.

Under the terms of the proposed sale, Baker Tilly will acquire RSM Tenon Ltd, and the entities trading under the RSM Tenon brand, including Investment Solutions, Financial Management, Corporate Transactions and Corporate Finance.

The adminstrator said the 2,300 staff would be retained, but there are likely to be staff cuts once Baker Tilly reviews the structure of the new firm, eliminating duplication of regional offices, service lines and support staff. With no staff cuts, the new entity will have around 4,000 staff, including 400 partners. To put this in context, Grant Thornton has 4,500 staff with 200 partners, arguably a more profitable model. Post acquistion, the Baker Tilly anticipates approximately £350m in revenues.

A Baker Tilly spokesman told Accountancy: 'Following completion we will form an integration team which will review how best to integrate [the two firms]. We will have to conduct a review before we reach a view on whether we need to eliminate duplication.'

The RSM Tenon demise illustrates the failure of the consolidation model, and shareholders will be major losers.

Commenting on the sale, Phil Shohet, director of M&A specialists Kato Consultancy, said: 'The thing is that despite all RSM Tenon's troubles, their clients are incredibly loyal. Maybe Baker Tilly thinks they can pick up £100m worth of clients' business but it's hard to see that clients will not change firms.'

There are a number of acquisition risks, such as loss of clients, fee income and restructuring costs. 'It is going to be a big salvage job; what will Baker Tilly do with all the unwanted partners, for example,' added Shohet.

Although the acquisition by Baker Tilly will not formally be completed until after a vote at a meeting of shareholders in late August, a sufficient majority have already committed to supporting the transaction.