黑洞社区

Where once Aberdeen steaks went, now hedgehogs follow. The news yesterday that troubled property consultant Erinaceous had been forced into administration makes it part of an unenviable handful of quoted companies that have gone unde, despite the increased access to funding and exposure to rescue by takeover that a stock market listing brings.

Only the Aberdeen Angus Steak Houses (2002), Polly Peck (1990) and the Bank of Credit & Commerce (1991) have suffered such ignominy in recent memory.

With Erinaceous, the writing seemed to be on the wall - if not from the start (although the choice of a name meaning 鈥渉edgehog-like鈥� is hardly the most dynamic), at least over the past turbulent year.

The company's myriad businesses simply were not generating enough cash to service the 拢200m of debt that the firm's misguided management had striven so magnificently to build up

Some who have sympathy for Erinaceous may attempt to blame the state of the credit markets for the company's failure to secure funding for a rescue from its banks, but the simple fact is that the company's myriad businesses simply were not generating enough cash to service the 拢200m of debt that the firm's misguided management had striven so magnificently to build up.

No bank, regardless of the market, would be prepared to support a company that, as one analyst said yesterday, was 鈥渁 house of cards from the start and just got worse鈥�. Erinaceous' problems lay originally in overexpansion - buying 27 companies over a period of seven years presents no small task when it comes to integration.

But up until about 18 months ago, the City had little problem with this - Erinaceous' share price remained above 300p, a reasonable level for a young company of its type. It was Erinaceous' choice of acquisitions that swiftly got it into difficulty.

After Erinaceous saw its share price tumble 99% within the space of a year, even shareholders who optimistically hoped for a rescue can hardly be astounded that none has been forthcoming.

Among the buys were a number of firms that were themselves in rough waters financially, some of which had also lost the key staff that had once made them great regional players. Rival consultants have since privately acknowledged that they looked at some of these firms but walked away, as they couldn't see much of value there.

Integrating one 鈥減roblem buy鈥� of this type can make the name of a chief executive - look at Ray O'Rourke; but attempting to integrate many, as Erinaceous has found, is a recipe for disaster. After Erinaceous saw its share price tumble 99% within the space of a year, even shareholders who optimistically hoped for a rescue can hardly be astounded that none has been forthcoming.

It remains to be seen what will happen to those parts of Erinaceous - the residential management division and property maintenance division - that remain out of liquidation, but surely cutting the ties with a group brand dogged by fraud allegations, mismanagement and, it has to be said, pure incompetence, must be a very logical first step.