Carillion’s managed legal services arm, Carillion Advice Services (CAS), could be sold off as a separate business as dozens of in-house legal staff face up to an uncertain future following the construction giant’s collapse.
The construction and outsourcing company, which filed for compulsory liquidation on Monday (15 January), is understood to be looking for a buyer for CAS, which is staffed by about 70 paralegals, with the bulk based in Newcastle, plus 10 in Birmingham.
CAS is 75% owned by Carillion Construction Ltd, which is one of the six Carillion companies to have entered liquidation. As well as providing support services to Carillion, CAS also has external clients – including Carillion’s panel firms – for which it handles routine, low-cost legal work such as contract management, document review and due diligence.
A member of the Carillion legal team told Legal Week: “They are trying to hurry and find a buyer for CAS. It is a viable asset, it makes a profit – much of the work is Carillion’s internal work, but they do have external clients.”
In 2012, Carillion GC Richard Tapp reached an agreement with all of the company’s panel firms, which include Slaughter and May and Linklaters, to pass on the commoditised element of their Carillion instructions to CAS. One panel firm, Clarkslegal, also offers CAS as a lower-cost solution to its own clients.
According to the Carillion source, about 80% of its work has historically been for Carillion, with the other 20% for external clients including panel firms such as Slaughters and Clarkslegal.
A successful sale of CAS as a going concern could provide much-needed job security for some of its staff, although the future of the business currently remains very much up in the air.
The Carillion source added: “An update meeting was held on Wednesday (17 January) and they couldn’t confirm job security. The management confirmed that if a buyer for CAS cannot be found, one option is that it may go into administration.”
Carillion’s wider in-house legal team – which comprises about 30 lawyers in London and Wolverhampton – was briefed about the liquidation process on Monday, with staff informed that they would be paid until the end of the month.
“Staff are sat around doing nothing – they are being given the option to leave early through the day. No certainty has been given; the small legal team in London feel that they have until 31 January,” added the source.
A partner at one of Carillion’s panel firms said: “CAS is a separate and standalone company – by virtue of its structure I would imagine it will be hived off as a separate business in some form of corporate restructuring. It is likely to be sold because they are a team, and there is good business logic to keeping them altogether.”
CAS, which is in the process of applying for an alternative business structure licence, was acquired by Carillion in 2011, prior to which it was attached to energy services company Eaga.
Services it offers include a document and contract review process which uses a traffic light system to flag up potential risks, and a due diligence and compliance service to minimise exposure to fraud, bribery and corruption.
Prior to its collapse, Carillion’s external legal panel comprised Slaughters, Linklaters, DLA Piper. Clyde & Co, FBC Manby Bowdler, Irwin Mitchell, Kennedys, MacRoberts, Pinsent Masons and RPC.