UPDATE as of December 2010

For the moment Tenon is absorbing its acquisitions Bentley Jennison and Vantis and is not expected to acquire for some time.  The nes of Vantis' demise will have been a crushing blow to any aspirant Consolidator and will probably put back launch by a year or two.

If you want to read the full story of the Consolidators, how they rose up to the time of its demise then we have a separate chapter in one of our books called Consolidators which you can buy for £65 which will give you most of the details.

In July Vantis requested that their shares be suspended as there was a possibility that it could not meet its banking obligations.  What seems to have happened is that, although the insolvency side got the go ahead to use funds in their Stamford International Bank insolvency from the USA arm that the West Indian island in which it is situated decided to remove Vantis as the insolvency practitioner. So, although Vantis immediately objected, it seemed that, in the short term, Vantis could no longer hope to recover their work in progress, or any profits from this project.  Having down graded their profits once this year it was probably the final straw and their shares were suspended.  In fact, their net borrowings had increased from £8K to £34K between 2003 and 2007 and available cash flows were all used to finance further acquisitions, so they had no short term reserves to call upon.  Earlier that week an administrator was appointed and it was announced that Tenon had acquired up to around 50% of the business for a small sum.  Most of the other units were acquired by their local management. 

During Jobtel's attenpt to raise a Consolidator we met with practices with fees in total of over £1 million and became convinced that a launch of a new Consolidator was possible in view of the interest.  We met with some 6 or 7 firms who gave this detailed consideration at their Board level whom one can expect to be possibly involved with any future Consolidator.

If you are a large practice with a base in London it is of particular interest since what was essentially lacking was a lead firm to drive the idea through into practice.

Jobtel's view is that it would cost something like £250K as a cost plus the time of the senior partner for a year.

As you can see from the Vantis debacle it is by no means a foregone conclusion that a Consolidator would be successful and there is a considerable risk attached to joining with others and losing the status of a partnership in whatever form it takes.  The essential form of a Consolidator, of course, is that investors are introduced who are interested in a reward, so that if funds are raised on a market, those funds have to be repaid either through ongoing dividends or in the aspiration that the share price will rise.  This latter immediately puts any prospectus on a higher risk level and therefore it scares away regular pension fund investors.

In order for existing partners to earn the same after flotation as before flotation, profits have got to rise in order to meet the investors new return.  Of course, a partner at the time of the flotation will expect to get at least 50% of his equity in cash, which he can invest on the open market and therefore draw an income from that.  So the partner will be prepared to accept a smaller earnings from the practice after sale because of this additional income.

However, it must be recognised that in the short term sellers are going to be wary of the possibility for the non-cash element of their acquisition price in the form of shares may never be realisable.

However, Tenon shows us that it is possible to survive and grow as a Consolidator given good management and well motivated staff.  Tenon have managed to pick themselves up from the floor and has every chance of succeeding and making it into the top layer of firms in the UK. There is no doubt that the  regulators made a grievous mistake in allowing accountancy practices to be reduced to four.  This gives too little choice and too little competition.  There is every chance that, given time, Tenon will provide an additional firm for that layer.