The security industry was left reeling yesterday as news spread that Norbain SD, one of Europe’s largest distributors of CCTV, IP video, access control and intruder detection equipment had gone into administration and been sold under a ‘pre-pack agreement’ – a controversial move that’s sparked criticism.
The story has had over 4000 hits since it went live on SecurityNewsDesk Monday afternoon.
As key manufacturers, suppliers and other distributors absorbed the implications, there was a marked reluctance to speak out publicly. The repercussions are likely to be significant, but many realise the practical reality of continuing to deal with the organisation and its staff.
“There’s bound to be Schadenfreude among other distributors, but this is a sad day because people will get hurt and jobs are likely to be lost,” one industry insider commented.
In echoes of the Eurozone crisis, the scale of the losses that some Norbain creditors may suffer is also being viewed in terms of the ‘contagion’ effect it may cause to the balance sheets of Norbain’s suppliers – many of whom are already struggling with the economic downturn. Observers are poring over the financials of those likely to be exposed and making arrangements in case of any “domino effect”.
The warnings are being amplified by the nature of the “pre-pack” sale to Newbury Investments – described by a commentator as “walking away with the assets, leaving others holding the baby”. Three years ago, Jon Moulton of Alchemy Partners, which tried to rescue Rover from collapse in 2002, said the technique – known as pre-pack administration – was “wide open to abuse”.
From April, HMRC has been able to demand a security from companies when the taxman considers there is a “serious risk” that the business will try to dodge PAYE or National Insurance Contributions (NICs). The crackdown is targeted at business owners who deduct income tax and NICs from their employees’ pay packets “but have no intention of paying it to HMRC”.
HMRC said these companies often build up “substantial debts” and then use a pre-pack administration to set up a new, debt free business – a so-called “phoenix firm” – to continue trading. Failure to pay the security – which can be a cash deposit or a bank bond – demanded by HMRC will be punishable with a fine of up to £5,000.
There is no suggestion that this is what the directors of Norbain SD have done, but the negative connotation of pre-pack agreements is making many in the security market nervous.
Suppliers and customers ‘in shock’
As the industry continues to assess the impact of the take-over, Gerard Garcia of Team Genesa says it’s not just the big manufacturers who may lose out, but installation and integration companies reliant on Norbain for essential equipment or support with current projects.
“We know of a couple of installers in the Kent area who may well be affected, though of course it’s the big suppliers who will bear the brunt of this,” he told SecurityNewsDesk.
“It has come as a shock to most of us – I haven’t had feedback from the likes of Samsung or Sony yet but everyone is trying to assess what impact this will have.”
The next few years will be very hard for parts of the industry, he warned, with customers cutting spending.
However, as one company owner speculated privately, for some struggling installers the administration of Norbain may actually be welcome news, at least in the short term, as it will give them more time before invoices are chased by the new owners.
“We had a similar situation in the past where we owed a supplier £25,000,” he said. “The liquidators get it out of you in the end but it’s nice to have longer to pay.”