PwC administrators preserve M40 flow despite Carillion debacle

04 February 2019 4 min. read

In its capacity as administrator for the collapsed outsourcing firm Carillion, advisory and auditing giant PwC was tasked with rapidly replacing the firm for a number of keystone service contracts. According to Partner Sarah Taylor, PwC was keen to avoid a panic sale however, particularly when it came to finding a new firm to assume Carillion’s duties connected to the M40 motorway.

Construction outsourcer Carillion filed for compulsory liquidation at the beginning of 2018, sparking a scandal that ran the length of the year. The company, headquartered in Wolverhampton, United Kingdom, had run into trouble after losing money on big contracts, as well as racking up unsustainable debts totalling around £1.5 billion – and though it flagged this up in a succession of profit warnings, the UK Government continued to award it work.

As a result, when the firm finally did collapse, its failure meant the Government was also forced to provide funding to maintain the public services formerly supplied by Carillion. Such was the extent to which the Government had relied on the outsourcers, Defence Secretary Gavin Williamson convened a meeting of the Cobra emergency committee – which had last assembled in the wake of the Parsons Green Tube attack – to discuss the situation.

PwC administrators preserve M40 flow despite Carillion debacle

Carillion is involved in major projects such as the HS2 high-speed rail line, as well as managing schools and prisons. It is the second biggest supplier of maintenance services to Network Rail, and it maintains 50,000 homes for the Ministry of Defence. It was also heavily involved in the maintenance of the M40 – a motorway connecting the major population centres of London and Birmingham – holding contracts for the upkeep of the major transport artery between junctions 1-15.

Big Four professional services firm PwC was tasked with the administration of Carillion following its high-profile fall from grace. Faced with the scale and diversity of Carillion’s public contracts, time was very much of the essence, however, the professionals were also mindful that an ill-thought out sale of Carillion’s contracts could impact vital services further.

Carillion’s M40 maintenance contract was a key example of this. During its long-term, critical service agreement, the company was due to provide both routine maintenance and additional services on a priced works order basis. That included ditch and verge maintenance, winter maintenance, like gritting ahead of snow-fall, and emergency response work including crash barrier and make-safe repair. Posting on careers network LinkedIn, Sarah Taylor, Partner at PwC, outlined how the firm went about the tricky proposition of finding a new outsourcer for the contract.

“Working quickly, we ran an accelerated sales process to protect jobs and ensure continuity of service,” Taylor explained. “Rather than a desperate fire sale, we used our network to run a competitive auction, resulting in the contract’s purchase by Egis. Due to required lender consents, our team successfully managed a lengthy period of operation following the agreement of legal documentation with Egis – this effective deal management mitigated the risk of non-completion and safeguarded 95 jobs.”

Despite quality as well as speed being paramount, according to Taylor, the process concluded just two months after the appointment or PwC as Special Managers. She concluded, “It was our agility as a team – our Tax, Corporate Finance, and Business Recovery Services teams all worked together as a single entity – as well as our global network, that enabled us to successfully negotiate a transitional service arrangement, sales and purchase agreement, and customer and lender consent in such a short amount of time and with no major disruption to this important part of the country’s infrastructure.”