Clearly not the most propitious restart to its M&A activity! AIM-listed IT recruitment company InterQuest Group has in effect issued a profit warning after a major client of recently acquired London-based recruitment firm Contract Connections Limited (CCL) terminated its relationship with CCL and withheld payment after an alleged fraud within the client’s organisation. InterQuest acquired CCL only a couple of months ago (see InterQuest buys IT staffing agency), its first acquisition since 2007. Ironically, CCL’s core clients are law firms.
InterQuest will provision £2.6m in the P&L in case its potential claim for restitution and damages for breach of contract against the CCL client fails. This represents the £600k that the client owes to CCL for prior business, and £2m in goodwill arising from the acquisition of CCL. InterQuest was to pay up to £4.6m (mainly cash) for CCL, so if they are setting aside £2m against the goodwill cost, the client concerned must really have been ‘major’. Lessons to be learned on due diligence? Anyway, we’ll find out more when InterQuest reports its half-time results next month, unfortunately the first for new CEO, Mark Braund (see InterQuest seeks ‘first advantage’ with new CEO).