Published on 25 July 2011 by Tony Groom

Following the demise of Rok and Connaught, another national building maintenance company, Kinetics Group, has just gone into administration with 500 employees being made redundant leaving a skeleton staff of 50 to deal with its five sites.

The Kinetics Group had provided building maintenance solutions to over 250,000 social housing properties, schools and public buildings across the UK.

Insolvency practitioners Begbies Traynor were appointed as administrators in July and attribute the demise to the loss of key contracts and delays in payments by customers.

The background to this dramatic failure seems to be rather complicated, but no doubt will be clarified once the administrators have a chance to investigate and report on the circumstances leading up to the close down of the business.

Just over a month earlier, in June 2011, there appears to have been an attempt by Kinetics Group to save the business through acquisition of the business and assets of a number of its own subsidiaries by a newly formed subsidiary SCP Renewable Energy Limited (SCP).

Various references to the acquisition by SCP refer to the purchase of assets from the following subsidiaries: Sureway Gas Limited, Kinetics Midlands Limited, Kinetics South Limited, The Lord Group Limited and DC Group Limited. It is not yet clear if the acquisition took place before or after these companies were placed in liquidation or administration.

A further complication is the status of SCP Renewable Energy Limited which is referred to by the administrators as being a newly incorporated company owned by Kinetics Group, however this name is not listed at Companies House.

What is clear, is that the June restructuring was flawed and Tony Groom of K2 Business Rescue questions the role of the various stakeholders, who in his view should have ensured that viable restructuring and business plans were in place as a condition of their approving the acquisition.

He also suggests that this is an issue with the sale of business and assets by an administrator, where the administrator is not responsible for the ability of any purchaser to run or fund the acquired business.

Rarely do administrators save a company as a going concern, so their only real objective is to maximise realisations for the benefit of creditors. This may explain the high failure rate among purchasers post acquisition.