Audit firm Baker Tilly is in talks about taking over rival RSM Tenon.

In a statement issued to the Stock Exchange yesterday, RSM Tenon said that following an “unsolicited approach” from Baker Tilly, the two firms were now in discussions about a possible buyout.

RSM Tenon has been providing information to Baker Tilly to help it in its investment evaluation process.

But the statement also warned that because of the level of debt within RSM Tenon, any takeover would require the support of its sole lender, Lloyds Banking Group. Because of this, any offer is likely to be “significantly below” the current market price of the ordinary shares of the company.

In line with Stock Exchange rules, Baker Tilly has until 5pm on 22 August to either announce a firm intention to make an offer for RSM Tenon or say it will not do so.

Baker Tilly was ninth in last year’s Charity Audit Survey by Charity Finance magazine, ranked by audit fees from charity clients.  It had audit fees of £1.13m from 58 charity clients.

Despite winning dozens of new audits from schools who had opted out of local authority control to become academies, Baker Tilly had fallen from fourth place in the rankings the year before. In 2011 its 70 charity clients provided £1.5m in fees.  

RSM Tenon was 25th in the list last year, down slightly from 23 the previous year.  It had audit fees of £106,134 from 11 charity clients, compared with £143,683 from 13 clients in 2011.

A merger between the two firms would continue the theme of mergers between professional firms in all sectors, and come hot on the heels of the merger of PKF and BDO earlier this year.