Liquidators now tend the living: Receivers who once buried recession victims are earning a crust from corporate restructuring. John Willcock reports

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The Independent Online
INSOLVENCY specialists, who have bathed in the profitable limelight over the past few years as the biggest series of business failures since the 1930s took their toll, are contemplating their own recession.

The small coterie of insolvency practitioners - the 2,000 or so receivers and liquidators who usually work for accountancy firms - inhabit a looking-glass world.

While the economy booms, they stand by idle - the poor relations of their audit and tax colleagues.

But as recession takes hold, the receivers perk up. Jobs start appearing as the banks begin ringing them up to ask if they will act as receivers to customers who can no longer service their debts.

The recession has broken all records, with senior London partners regularly earning more than pounds 1m a year - but at a heavy personal cost. Alan Bird, insolvency doyen of Price Waterhouse, said he worked twice his normal yearly hours in 1992.

Now that recovery is finally here, however, insolvency practitioners are nervously contemplating fewer jobs, lower fees and more competition for work.

In 1989 there were 1,500 receiverships - company failures where banks demanded repayment. This figure leapt to 5,700 in 1991, fell to 5,100 in 1992, and this year looks set to be about 3,200.

The big six accountancy firms, which have the biggest insolvency practices, started recruiting heavily in early 1990. KPMG Peat Marwick, for example, doubled its London corporate recovery staff from 80 at the start of 1990 to 160 in 1991. Numbers have stayed roughly the same since then, says Phil Wallace, corporate recovery partner.

Steve Hill, a partner in Coopers & Lybrand's insolvency department, the biggest in the UK, says that although business collapses are down by roughly a third from their peak, all is not lost.

'There's no wolf at the door yet,' he says. 'All it means is that we are working eight-hour days instead of 12-hour days. There are still big names out there that are in trouble. It's a rash assumption that there won't be another Ferranti in 1994.'

Coopers is a good example of how the biggest firms have dealt with the rise and fall in demand for insolvency staff. The insolvency department, which until recently was known under its old name of Cork Gully, extensively borrowed audit staff from the parent firm as business collapses rose and audit work declined.

The corporate recovery department started off with roughly 600 partners and staff before the recession, growing to 900 at its peak last year. 'I assume we will get back to 600 at some point but we're nowhere near there yet,' says Mr Hill. Demand for management consultancy also declined, releasing more staff, while Coopers also seconded a large number from Australia. Many of the Antipodeans are now heading home. 'We hope to come off the boil painlessly,' he says.

The Society of Practitioners of Insolvency (SPI), which acts as a trade body and licensing authority for the profession, is polling its members to see which types of firms are doing what business. The results are not yet in, but Tim Grundon, an SPI spokesman, says that anecdotal evidence would suggest two things: all firms are trying hard to win more work in the pre- insolvency restructuring market and medium-sized firms are winning a larger slice of the straight insolvency work.

The first point is understandable. Insolvency practitioners have always made great play out of their confidential rescue work for troubled companies which can never be referred to in print, for fear of damaging the rescued company.

As company collapses decline but the amount of corporate restructuring work stays high, receivers and administrators are hard at work buttering up their banking contacts to get more of this lucrative work.

For instance, Stephen Adamson, one of the Ernst & Young administrators who recently rescued Canary Wharf after a two-year struggle, says that he is now 'turning his back on insolvency'.

Mr Adamson is setting up a national department solely devoted to restructuring live companies, rather than burying dead ones. This involves a lot of corporate finance work. Many firms are now pushing their corporate finance and insolvency departments closer together to help this process.

Another leading insolvency practitioner, Allan Griffiths of Grant Thornton, recently left the firm's Manchester office after many years in receivership work in order to concentrate on bank-led restructurings in the London office.

Mr Griffiths had a top-secret watching brief on Ratners, the jewellery chain which fell foul of Gerald Ratner's 'crap' remark. Mr Griffiths' job was to hold the banks' hands, advise on turning the finances around and be on hand if it all went wrong.

The argument that medium- sized firms are getting a bigger slice of the pie is difficult to prove. But such firms constantly refer to their lower overheads when they market themselves to the banks for receivership appointments.

One idea is that as most businesses are slimmer because of the recession, most company collapses will now involve fewer assets to be recovered by the receiver.

Fees are directly linked to assets recovered. And as medium-sized firms are cheaper to run, they will be able to chase skinnier jobs than their larger competitors.

One medium-sized firm does not agree. Paul Barry, a partner with insolvency specialists Leonard Curtis, says that the efficiency of the firm is more important than size.

He believes that many smaller firms have avoided recruiting people during the boom by subcontracting out work to other small firms. Both Mr Wallace and Mr Barry agree that the big firms retain a stranglehold over the big cases because they have more resources.

Phil Wallace of KPMG says that many of the big cases, such as Polly Peck, BCCI and Maxwell, have overloaded senior partners with work. This has enabled several medium-sized firms, such as Robson Rhodes, Levy Gee, Smith & Williamson and Buchler Phillips to pick up larger jobs than they would have done before the recession.

Mr Barry's verdict is: 'Don't panic. There will always be a role for the insolvency practitioner.'

(Photograph omitted)