It was quite a year for Dorothy Alexander and Neil Pearson. In 2003, the mother and son, both veterans of the care industry, decided to open their own business providing carers and in-home care services to disabled and elderly people.

Ingram Care Services pushed ahead to win contracts with Gateshead and Newcastle Councils, and some 12 months later relocated from its Berwick headquarters to Tyneside to strengthen its relationship with its clients. At this point, its turnover was £250,000 a year.

After a promising start, the family firm gradually lost control of its finances. This summer, with its 15 employees waiting for overdue wages, the fatal blow was struck: HM Revenue & Customs sent a winding-up petition for an unpaid tax bill, understood to be around £90,000.

With no way of settling their debts, they turned to their accountant, Paul White of Optimal Accountancy. He examined the depth of their problems and decided that there was only one option – to introduce them to Simon Lundy.

Restructuring specialist

Alexander and Pearson met with Lundy, the director of corporate recovery and restructuring specialist at Begbies Traynor, in the firm’s Newcastle office to outline their problems. Lundy quickly understood the task he faced.

“We had to find a way to save jobs and to ensure continuity for the two local authorities, which were faced with the imminent withdrawal of labour,” Lundy says.

“If the company collapsed then trading would have to cease – with no carers serving the residents of two local councils.”

He adds that there is a shortage of carers in the area and Ingram’s employees would not have been able work for another company until they had undergone a series of checks by the Criminal Record Bureau, a lengthy process.

Lundy needed to find a buyer for Ingram that was registered with the Commission for Social Care. He was in luck as somebody already had their eye on the business.

A way in

Amanda Dickinson and her husband Ian had been running a company that trains carers for the past four years. In 2007 they established Positive Life Choices to provide in-house help to housebound people. “We know the business inside out and it has always been our ambition to have two strings to our bow,” Ian says.

Despite the Dickinsons’ industry contacts, they were finding it tough to win contracts from local authorities. They realised that the best way of getting a foot in the door would be for them to acquire a business with existing contracts.

“We trained Ingram’s staff and soon became aware of the difficulties the company was having,” Ian says. “We heard about it at the same time as they were issued the petition. This gave us an opportunity to save jobs, give the people they were caring for some continuity, and provided us with the foothold we needed.”

Lundy says that the Dickinsons were interested in the business before it faced insolvency. However, they were scared off when they took a closer look at the books.

“They looked at its affairs, found it was financially shot to pieces and had a winding-up petition from the Revenue for PAYE. There was no prospect of them buying it because it was bust.”

Due to the Revenue’s winding-up petition, the company couldn’t go straight into administration, it had to make a court application.

“That meant a hearing – not just the filing of the forms that you normally get in an administration,” explains Lundy.

Lundy filed the application on 11 August and was originally given a court hearing in October. “That was brought forward to 29 August after some pleading.

“Having got the purchaser ready, this was still a long way off,” he adds. “Then we had the problem that the carers hadn’t been paid, and there would be no prospect of being paid for a while if it went into liquidation.”

Positive Life agreed to take the staff on as a sub-contract arrangement with the approval of the councils until the deal closed to keep providing the service, maintaining continuity.

“The councils were very much a party to the agreement and put in place all sorts of provisions to enable Positive Life to provide the service as a sub-contractor.”

One of the main points when it came to negotiating the deal was to make sure that if the Dickinsons were to buy the business they would retain these contacts. They didn’t want to buy the goodwill of the business, which was the contracts with the councils, and then find that they didn’t get the work.

Ian says this didn’t turn out to be a problem as the councils were satisfied that Positive Life was taking over the business. “Their main concern was that the care staff continued to provide their services. We offered continuity by arranging to transfer Ingram’s staff and guaranteeing their wages.”

On 18 September Lundy successfully negotiated the sale of the company, including its contracts and staff, to Positive Life. The financial terms of the deal cannot currently be disclosed, but a large chunk of the funding came from the Dickinsons’ savings. “We also used our existing overdraft, so it was a combination of debt and our own money.”

New beginnings

Now that the dust has settled on the deal, the new owners do not regret making the move. “There have been the obvious headaches as you would expect, but we are more than happy with the business. Everyone has got what they wanted out of it, with the possible exception of the people who ran the business into the ground in the first place, which is how it should be.”

The new owners are currently integrating Ingram into Positive Life by trying to make sure the company doesn’t suffer more financial problems. “I can only give you my suspicions about why the company failed,” Ian says. “The main one was that they were paying too much for rent.”

Post-completion, the Dickinsons have made a significant change to Ingram’s operations. “We have taken a much smaller office and relocated a couple of miles away.”

The new owners are using the contracts to win new work. “We recently tendered for a piece of work with Gateshead and South Tyneside councils. We are hoping that extra experience will make a difference.”