Stephenson retakes control of Collar but history is not on his side

On Tuesday, creditors voted to return control of Collar Group to its founder, Ephram Stephenson, having approved his Deed of Company Arrangement (DOCA) in which current and former employees will eventually receive their full entitlements as long as the company continues to operate.

Formal control will revert to Stephenson once the administrators have completed the DOCA formalities, which is expected to be within the next two weeks.

What happens then?

On the surface the business continues to operate normally, with Stephenson back in control.

However, things are far from normal, with the business’s most important asset—its employees—no doubt still largely shell-shocked about the events of the past six weeks.

The emotional roller-coaster they have each ridden will stablise for a short time as the DOCA provides some predictability about the future but the long-term, even medium-term, future for Collar remains in serious doubt.

The Australian recruitment industry is a small world in which a significant negative disruption or event has proven fatal for an agency’s long-term growth prospects.

Rubicor, despite the many optimistic pronouncements coming from the new directors, went backward on all financial metrics, apart from director remuneration and related-party benefits, after David Hutchison, Angus Mason and Sharad Loomba took executive control of the company on behalf of Cashel Capital Partners in mid-2015.

In less than four years, Hutchison, Mason, and Loomba sent Rubicor plunging into liquidation through a combination of their respective delusion, lies, and incompetence.

Ignite (formerly Clarius, formerly Candle) has never recovered from the 2013 appointment of Garry Sladden as chairman, having had five different CEOs, none of whom has been able to resurrect the company’s long-term profitability on the back of ever-declining sales numbers

HJB listed on the ASX in 2000, and it went downhill from then until it went broke in 2013 due to a string of key senior leadership departures, a revolving door of CEOs, and poorly performing acquisitions.

In 2006, Boston Kennedy had offices in four states and was a significant player in the mid-market and executive space. Seven years later, it went under, with 45 employees, seemingly never recovering from the puncture to momentum the GFC delivered.

“Super boutique” FutureYou launched in a blaze of publicity in 2016, and within two years, the cracks were wide and deep to the extent that the company’s CEO, Simon Meyer, was sidelined (and left the following year when the firm’s advisory arm was sold ) as employee numbers plummeted from around 70 to less than forty. Today, its headcount hovers around 20 in one office, and it’s barely a footnote in the Sydney recruitment market, having abandoned its Melbourne expansion some years ago.

Ambition purchased London financial services recruiter Witan Jardine at the peak of the pre-GFC bull market in late 2007 for an initial payment of $27 million. This initial payment contributed to global sales, accelerating more than 60 percent to $129 million; however, less than 18 months later, the company announced a $22 million goodwill write-down against the purchase.

In the 2023 financial year, Ambition posted sales of $96 million, of which only $7 million came from their UK operations.

Ephram Stephenson’s two previous attempts at recruitment agency ownership finished with a whimper, not a bang.

The circumstances under which Collar went into voluntary administration did not portray him in a positive light, and the report from the company administrators that Stephenson may have breached sections 180 of the Corporations Act (care and diligence) and 181 (good faith) will remain an ongoing cloud over his credibility.

Under the “Fit and proper person requirements” of holding a labour hire licence Stephenson will need to declare  ”…whether you or a body corporate in which you were an officer, …in the last 5 years, been insolvent, or been an externally administered company under the Corporations Act 2001 (Cth).”

Holding a labour hire licence in the jurisdictions in which such a licence is required is a critical piece of compliance for which Collar is not assured of retaining with Stephenson as a director.

Stephenson clearly remains confident and optimistic he can lead Collar to better times, but the history of the rise and fall of large and high-profile recruitment agencies in this country strongly suggests he’s unlikely to succeed.

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