Kinsey Allen, the specialist financial services recruiter, has gone into administration, following a failed pre-pack administration last year. Despite the prepack, where the previous liabilities were reduced, it still struggled on.
Recruiters have managed to reduce their overheads quickly in the current recession but the problem remains of too many recruiters chasing too few client vacancies.
What could have Kinsey Allen done to survive? Could a CVA have saved the business? The problem with a pre-pack is that it is possible that the company thought its problems were over and carried on in the same way as before that got them into trouble in the first place. It may have had to TUPE (transfer of Undertaking Protection of Employees Rights) across to the new company. Ina CVA the employee numbers can be sharply reduced with nil TUPE costs and nil cashflow impact of redundancy costs.
As a condition of the CVA, (well ours anyway), the business must produce monthly management accounts, changes to the board are often made, and a real discipline is injected into the business. Some don't survive it but that is life. Better a leaner and fitter business that can weather the storm and pays a dividend to creditors than one that fails again..