Pre-Pack Administration for a Suffolk Recruitment Company

Case Study: Strategic Rescue of a Suffolk-Based Recruitment Agency

The Challenge: Navigating Sharp Revenue Decline

A specialized recruitment consultancy in Suffolk, which had historically achieved annual revenues of £900,000, faced a significant downturn in trade. While the business maintained a strong reputation and a high-quality candidate database, it was burdened by approximately £90,000 in HMRC liabilities and additional arrears with the landlord and trade creditors.

Despite these financial pressures, the company held strategic importance for a larger national recruitment group (ABC Newco Ltd). The challenge was to preserve the company’s goodwill and its talented recruitment team while addressing the legacy debt that threatened the business’s survival.

The RMT KSA Solution: A Joint Venture Pre-Pack

RMT KSA was appointed to facilitate a pre-pack administration. The strategy centered on a Joint Venture (JV) between the existing management and the larger national group. This approach allowed the business to move into a professionally managed environment while shedding the historic liabilities of the old company (Oldco).

Key components of the turnaround plan included:

• Asset Acquisition: The newly formed company (Newco) acquired the trading name, goodwill, and physical assets. To ensure transparency and compliance, a RICS-qualified valuer determined the fair market price for these assets.
• WIP and Debtors: The Newco purchased work-in-progress (placements already made) at an agreed rate, providing immediate liquidity for the benefit of creditors. Existing invoice discounting facilities were managed to collect the debtor book, with surplus funds allocated to the administration estate.
• Management Support: ABC Newco Ltd supported the new entity with non-executive directors, centralized procurement, and high-quality financial management, allowing the original directors to focus on driving sales.
• Strategic Equity: The JV structure gave the majority shareholder a clean vehicle with 75% equity, while the larger group held a 25% stake to provide corporate stability.

The Outcome: Job Preservation and Continuity

The execution was swift, ensuring that clients and candidates remained largely unaffected by the transition. By moving the business into a professionally managed framework, the original directors were relieved of creditor pressure and could focus on returning the business to profitability.

• Job Preservation: All existing employees were transferred to the new entity under TUPE regulations, saving every role within the Suffolk office.
• Business Survival: The company successfully navigated the transition and was still trading profitably 18 months post-completion.
• Creditor Benefit: The managed sale facilitated a dividend payment to the original company’s creditors, an outcome that would likely have been impossible in a forced liquidation.

Compliance and Professional Standards

The success of this pre-pack was rooted in rigorous adherence to Statement of Insolvency Practice 16 (SIP 16). By ensuring transparent marketing and independent valuations from the outset, RMT KSA protected the directors and the Insolvency Practitioner from potential creditor challenges.

At RMT KSA, we are experts in recruitment sector rescues. If your agency is facing cash flow pressures or HMRC arrears, a pre-pack may be the tool required to move your team into a professionally managed, debt-free future.

If you require a confidential assessment of your business’s eligibility for a pre-pack, please contact us today for a detailed consultation.