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MCGLADREY UNITS TO REUNITE

mcgladrey-logoRSM McGladrey, which operates one of the largest Microsoft Dynamics reselling businesses in the United States, is going to be rejoined to the traditional tax and accounting operations from which it grew. RSM McGladrey was part of McGladrey & Pullen, until Aug. 2, 1999 when H&R Block acquired it. Since then, RSM has operated with McGladrey & Pullen in what the parties termed an alternative practice structure. That always suggested the surgical separation was not a good idea and everyone knew it.

But the consultants and the accountants are going to be back together since M&P is spending $610 million to buy its separated sibling from Block. That’s about double what the tax services company paid to purchase the unit 12 years ago. Block spent $240 million in cash and assumed about $50 million in pension obligations 12 years ago. In the repurchase, Block will finance about $65 million of the price and will also record an after-tax charge of about $53 million for its first quarter ended July 31. The RSM McGladrey operations had been a weak performer for Block over the past two years. Revenue for the unit was $829.8 million for the year ended April 30, down from $860.3 million the prior year and $898.8 million for fiscal 2009. Over the same two years, operating income dropped to just over $49 million from $96.1 million. The relationship had also been strained when M&P sought to end its joint operating arrangement with Block, but last year came to terms for a new contract.
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