The two organizations that were once operated as McGladrey & Pullen will reunite when the accounting firm of that name acquires RSM McGladrey for about $610 million from H&R Block, about double what the tax services company paid to purchase the unit 12 years ago. The parties continued to function under the McGladrey name under what they described as an alternative practice structure, but the Block-owned organization had noticeably weakened over the last few years.Block spent $240 million in cash and assumed about $50 million in pension obligations when it purchased RSM McGladrey on Aug. 2, 1999. In the repurchase, Block will finance about $65 million of the purchase 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. Factors in the decease included a $15 million impairment write down of goodwill in 2010.
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 contract.