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Tenon deal scrapped but pre-pack goes ahead

22nd Aug 2013
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Baker Tilly does not intend to make an offer for the entire issued share capital of RSM Tenon, but following the appointment of Deloitte as administrators this morning, a deal has been agreed for the sale of Tenon's trading entities.

Early this morning Baker Tilly said in a statement to the market that despite pulling out of the takeover deal, there was significant value in the RSM Tenon Group and that it continued to be interested in an alternative potential transaction involving an acquisition of part or all of the business.

The Financial Conduct Authority (FCA) temporarily suspended shares in Tenon from trading this morning “at the request of the company pending an announcement”.

That announcement turned out to be the appointment of joint administrators from Deloitte - including Matt Smith, Nick Edwards and Clare Boardman - who immediately sold Tenon’s trading subsidiaries to Baker Tilly, with a pre-pack deal expected to complete within the next two weeks.

The trading entities of Tenon have not entered insolvency proceedings and will continue to operate as usual.

Deloitte partner Matt Smith said: “Immediately following our appointment, a sale of RSM Tenon Group plc’s trading subsidiaries to Baker Tilly was agreed and is expected to complete within two weeks, following regulatory and internal approval at Baker Tilly, which we are advised is a formality.

“We believe the proposed sale to Baker Tilly represents the best outcome for the RSM Tenon group.  The management of the group have stabilised the business, returning it to profitability over the past 18 months and making this transaction possible to secure its future,” Smith added.

Smith, Edwards and Boardman have also been appointed joint administrators of Premier Strategies Limited - a subsidiary entity which historically provided tax advice, but ceased selling new business in March 2012.

Deloitte said that under a proposed sale of the trading entities of the group to Baker Tilly, subject to certain approvals, no job losses are expected.

Last month Baker Tilly made an approach to Tenon and has since been in talks over a possible merger. The firm was given a deadline of today at 5pm to announce whether or not it intended to make a takeover offer.

Baker Tilly had said that any offer would be in cash, but Tenon warned shareholders that they would see very little return due to its high level of debt. Last week Tenon said shareholders would not accept a “de minimus” offer.

Tenon shares plummeted in the weeks that followed and earlier this month it said investors would likely receive “minimal value” if it merged with Baker Tilly due to the high level of debt it carries.

Back in February, Tenon said it was unable to reach a new agreement with its sole lenders Lloyds Banking Group to reset the terms of its lending facility.

Lloyds said this morning that, should the company, as expected, be in breach of its banking covenants, it would not be willing to grant a covenant waiver. 

It added that in the absence of any other available facilities, Tenon does not expect to continue to be able to meet its liabilities as they fall due and as such the appointment of administrators is the most appropriate course of action.

Replies (16)

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David Winch
By David Winch
22nd Aug 2013 12:01

To sum up it looks as if the holding company has gone into administration meaning shareholders will get nothing for their shares and Lloyds Bank will lose money on its lending to the group.

But the actual trading businesses (which were set up as subsidiary companies) are being sold to Baker Tilly and will continue, with no job losses.

Presumably the trading subsidiaries either had not guaranteed the borrowings by the holding company or some arrangement has been reached with Lloyds Bank about that.


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By elansea
22nd Aug 2013 12:37


Another rip-off pre pack. When will they be outlawed?

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By Ian Bee
22nd Aug 2013 14:36

Pre pack again

My inclination is to agree that pre packs are a rip off.

Tenon had already warned shareholders that they would get little value for the equity due to the high level of debt, and as was reported here, the shareholders were not happy with that.

Baker Tilly would have been liable for the debt on a takeover but with a pre pack the debt is not its responsibility and the shareholders still get nothing. 

Presumably Lloyds Bank will get as much of the debt that can be repaid following the sale of the assets to Baker Tilly, and they must have seen this as the best way forward. Also suspect that in the larger scheme of things the write off for Lloyds is not significant. 

The question remains about other creditors who now will not get paid in full and for whom a write off may be significant. 

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By kmc
22nd Aug 2013 16:26

This is the best way forward for the Tenon and realistically the pre-pack was the only option available to safeguard the business.

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David Winch
By David Winch
22nd Aug 2013 21:36

Time will tell . . .

Baker Tilly have had nearly a month to go through the books of RSM Tenon before purchasing the assets via the pre-pack more cheaply than they could have taken over the shares of the quoted company (with the accompanying liabilities to the bank).

I do not know whether the pre-pack has also resulted in the liabilities for future instalments of the purchase price on the acquisition of Bentley Jennison evaporating.

With the benefit of hindsight the acquisition of Bentley Jennison in 2009 looks like a serious mistake by Tenon.

Whether the purchase of the assets of RSM Tenon will, with hindsight, look to be a masterstroke or a serious mistake by Baker Tilly, time will tell . . . .


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23rd Aug 2013 08:53

Safeguard the business ....

@kmc - not quite sure why safeguarding the business relevant. It failed (for whatever reason) and 'went bust' - end of story. Is it acceptable that all concerned can just walk away and via ‘financial tricks’ leave the debtors high and dry? Presumably those who were responsible for the failure just carry on as before in other jobs etc. - oh! and let’s not forget the nature of the business or its role in ‘advising’ others – mmm …… accountability ?

On the other hand this does raise an interesting issues in respect of the 2007/08 Banking crisis.

As pre-pack (flavour of the decade) seems to be the preferred method of shedding liabilities and continuing with the business, why did the Government of the day not employ this wheeze with the Banks?

After all the Government was liable anyway for covering all bank depositors (either legally or morally) so just put all the banks into a pre-pack instead of a direct bail-out. This approach would have sent a salutory message and dumped all the extraneous liabilities, whilst at the same time leaving the Government with a clean sheet to go forward

Obviously there are reasons why this was not done but can anyone come up with them?

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David Winch
By David Winch
23rd Aug 2013 09:38

Multiples and dominoes IMHO

A bank, by its nature, borrows from depositors on short-term arrangements and lends to borrowers on longer term arrangements (whatever the contracts may say, most borrowers could not repay overdrafts, for example, immediately on demand).

So getting money back from borrowers for a bank that has 'gone bust' would be a tortuous and long-winded process involving heavy losses.  Whereas 'propping up' the bank is likely to involve smaller losses.

In a macro-economic sense, every £1 of fresh depositors' money results in £5, or £10, or £20 of new lending.  In that sense a bank actually 'creates' money.  All that would go horribly wrong if the bank went 'bust'.

Also most banks owe money to other banks.  If one goes 'bust' that has a knock-on effect on other banks - which would be potentially catastrophic.

So, in a nutshell, the High Street banks are 'too big to fail'.


P.S.  I agree there is a certain irony in a firm of accountants, auditors and turn-around specialists which a while ago had to re-state its earlier year's accounts to recognise incorrect accounting and then went into insolvent administration!

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By flyer
23rd Aug 2013 13:34

General Practitioners
As a general practitioner of 24 years I restrict my drawings to what my business makes and if times are good that's great if times are bad I watch the position as every businessman has to. So Rsm tenon has managed to increase its debt to the bank be it for losses or take over costs the so called partners continue to draw and then claim they are in trouble. We the tax payer bail the bank out that bails them out and I accept that is the best position but who has the made the mistake here those practitioner s who are careful or those who owe money to the bank and can walk away. Mmmmmmmm just need to think about that. Ps anybody want to buy a practice

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By Nick Graves
23rd Aug 2013 15:02


I've not stopped chuckling at the irony bit! I've always had my deep cynicism about the entire insolvency process.

But pre-packs preserve the business and allow the business to survive and the buffoons to learn from their mistakes. Or to repeat them...

Despite my free-market pretensions, there are certain situations (eg DAF Trucks BV in the 1990s just after a massive investment in time for the recession) where such intervention did seem genuinely pragmatic. But few and far between, I'd say. And like anything, open to abuse...

David touches on the nature of the banks' Ponzi scheme; the super-elite which truly owns the world banks (and therefore are the Govt's masters) would not appreciate having their wealth eliminated. Even though such creative destruction would probably have resulted in a swifter recovery. Far easier to 'adjust' their creditors downwards (ie, Joe Public's and pensions) by adding another zero to the currency. 






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By libraguy
23rd Aug 2013 15:11

Tits[***] up
This has been an accident waiting to happen for years. As a former partner of a Tenon acquiree, I think I know why. Simple stuff. E mail me privately and I'll spill the beans.

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By neileg
23rd Aug 2013 15:41

Not sure why prepacks are so emotive

I am deeply mistrusful of a prepack sale to the former owners/managers of an insolvent business but I'm equally mistrustfull of any sale to these people which simply passes on the assets and strips out the liabilities.

However, this prepack is more of an arms length arrangement and any other potential buyer could have done what Baker Tilly has done. What this will have achieved is preservation of employment and continuity for customers - no bad thing in the current climate.

A racehorse is a wonderful beast and may be worth millions but when it's dead it's dogmeat.

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By ricpayne
23rd Aug 2013 21:00

Consolidation was never going to work in this industry of ours

Sad though it is, Tenon's failure does not surprise me in the least. I wrote a White Paper on why I believed consolidation would not be successful in our industry back in 2000 when I was the President and CEO of Results Accountants' Systems and we had several thousand firms in our global network.

At the time I published the White Paper I received quite a lot of critical feedback along the lines us being disappointed that we missed the boat because we should have done a consolidation played with our own member firms - something like 3,000 around the world.  But we did not make that play because we did not believe a consolidated entity was viable! Which is what has been the way the game has played out.

If you're interested you can get a copy of my original White Paper by clicking on this link


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By DMGbus
23rd Aug 2013 21:53

Problem with pre-packs

Perhaps I'm wrong on this, but here's my concern.

A pre-pack takes planning and time.

During the this setting up / planning time the insolvent company will clearly know that it may be unable to settle it's financial obligations yet it continues to buy from creditors - creditors that the directors must surely know will not get paid.

Some might consider this to be a deception.

Perhaps I am wrong.

Perhaps there are safeguards. 

Yes it is good that jobs have been saved, but maybe at a price - deceived suppliers in the period immediately before the pre-pack?  

It was wise planning to ring-fence assets in subsidiaries that could be sold as part of a pre-pack.    If the subsidiaries were the ones continuing to buy on credit then hopefully the creditors will be paid.    But, did the holding company buy on credit during the pre-pack setting up period - creditors who will not be so happy, I guess?



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By keenscmk
24th Aug 2013 17:59

Pre-packs for accounting firms?

Having read the wise words and comments of previous commentators, I just wonder whether this process should be available to the very organisations, who have applied the process to their own clients in the past (in the name of continuity of employment and client/customer support) We have seen Numerica and others as examples. When a business fails, it fails, and save for the public interest defaults (i.e. banks, hospitals etc),in my opinion, the accounting business should be allowed to be put into formal administration, with the administrators then being required to offer to sell the goodwill and assets to all other parties. Or perhaps, so the argument goes, the administrator's costs would increase, and realisations would fall, reducing the payout to the creditors (normally the banks, who have secured their position in the original lending), leaving others, such as HMRC (the general public) and other creditors to take the hit. But for accounting firms?? Thought for the day.

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By North East Accountant
27th Aug 2013 09:40

Deloitte the real winner

I wonder how much Deloitte will get out of this? Couple of million, no doubt!

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By Alan52
27th Aug 2013 11:11

How much are Baker Tilly paying ?

What we don't know at this stage is how much BT are paying for the business - given the swiftness of the pre-pack, other accountancy practices have not had the chance to to bid for other parts of the business -  given that LLoyds TSB will be the ones to suffer, and given that this bank is partly state owned, is this a good result for the taxpayer ?.

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