The companies taken over by ’one-stop consultant’ Erinaceous, aka the exploding hedgehog, have spent two years struggling to safety. Roxane McMeeken reports live from the front line

The corporate battles of the past few weeks may seem dramatic enough, what with Davis Langdon and Scott Wilson being encircled up by American rivals, the social housing specialist Connaught losing half of its market value and Rok losing half its profit. But cast your mind back a couple of years and these struggles pale in comparison with the career of one particular company.

Remember the enormously ambitious “one-stop-shop” property consultant that came from nowhere in 2003 and raised £9.1m by listing on the alternative investment market? You may also remember that it blew all its cash on a breakneck acquisition spree that left it £170m in the red and finally, on 14 April 2008, in administration? It was of course, Erinaceous Group.

Although Erinaceous’ defeat also wiped out most of its purchases, a handful managed to fight their way out of the trap. Some bought themselves out of administration, others set up as new entities with almost identical offerings, but all were driven by the desire to save long-established names.

As they were nearing safety, wounded but alive, they were hit by a new calamity: the credit crunch and the recession. Some defended their positions better than others, but none were overrun - and all of them have their own tale of survival which, in these turbulent times, may make heartening reading (see Where they are now, below).

’Richard graves didn’t buy back the business to make redundancies; he bought it to make it great again. I think we got the right result’

Mark Bevan, Graves Partnership

Of the firms that emerged from Erinaceous, the one that has had the toughest lot is also one of the best known: the Birmingham QS Francis Graves. The firm, now called Graves Partnership and a subsidiary of Croydon-based consultant Henry Riley, was bought by Erinaceous for £7m in September 2005. Richard Graves, the son of the firm’s founder, remained at the helm until January 2008 when, witnessing the Erinaceous nightmare unfolding, he resigned and began the three-and-a-half month process that would lead to him buying back his family business.

With the 30-strong company back in his hands by May 2008, he told Building that although he had been through the mill he was looking forward to the future and “enjoying the sunshine”.

At this stage he recruited Mark Bevan, who was business development director at the conractor Shaylor Group. Bevan says: “I’d known Richard for 30 years and he suggested I came in to look after private sector clients while he did the public sector.”

But there was a shadow over the offer: Graves told Bevan he had pancreatic cancer. Bevan was not worried at this stage, however: “I knew he was ill but he thought he’d beat it, so I took the job and we threw ourselves into it.”

The coming weeks did not go as the pair had hoped, however. Bevan says: “Richard’s health deteriorated over the next two or three months while I was still trying to get to grips with the business. It got to the stage where it was just me and the finance partner keeping the thing going.”

The company was forecast to make a small loss in its first year, but Bevan wasn’t unduly concerned because “we were effectively a start-up” and as such would not necessarily be expected to turn a profit in year one. Then came another blow: the rapid deterioration of the economy after the collapse of Lehman Brothers in September 2008. After that “the work wasn’t exactly pouring in”. As a result, Graves began financing the firm from his sickbed.

’We had a party after we bought the firm back from Erinaceous’ administrators. Our staff were happy to be back in the land they knew’

Chris Lowe, Rose Project Services

This left Bevan in charge of a company in dire financial straits. The company was forecast to turn over £1.5-2m for 2009 while its overheads and salary bill added up to at least £1m. Then, in July 2009, Graves unexpectedly lost his fight with cancer at the age of 53. This left Bevan with a financial crisis on top of his grief at losing a close friend. Bevan says: “We owed a couple of hundred thousand so it was touch and go.” Bevan initiated “chats” with firms in the hope that there might be some interest in taking over the company. But he found “there was a lack of interest owing to the risk involved.” By then, “we knew the writing was on the wall, so we sought legal advice and appointed an administrator”.

Once the firm was in administration the potential buyers came back and a deal was agreed with Henry Riley. Bevan says the logic was that the two firms had a connection - a Henry Riley partner and a Graves partner had been friends since university. In addition, Henry Riley wanted to break into Birmingham, which is notorious as a closed shop to consultants from outside the city, and would be happy to keep the Graves name to achieve this.

Rileys acquired 90% of Graves, which had shrunk from 30 to six people, in November last year and added it to its nine other subsidiaries. With the arrangement sounding similar to the deal with Erinaceous, you can’t help but wonder if this is what Graves would have wanted. Bevan strongly disagrees. “I think Richard would be comfortable with what happened. It simply wasn’t possible for us to go on, especially with Richard having been the main financier. Had we not sold, we would not be here now.

He adds: “Without this particular deal the practice would have been subsumed into another organisation and we would have lost the staff. We felt a duty to keep the family name because there’s so much sentiment attached to it among our staff and clients.”

With the financial and administrative backing of Henry Riley, Graves is beginning to get going again. It now employs 10 people and works in the auto retail, affordable housing, defence, education, renewable energy and infrastructure sectors. Turnover for this year is expected to be £600,000 and Bevan anticipates that the company will make a profit. You sense that he’s determined to forge ahead for Richard Graves’s sake. “Richard didn’t buy back the business to make redundancies; he bought it to make it great again. I think he will be looking down and thinking we got the right result.”

Where are they now?

The other firms that escaped Erinaceous are all still trading. They are: Tom McNamara & Partners, an Irish QS; Monaghans, a Sheffield-based multidisciplinary consultant; Leach Rhodes Walker, a Manchester architect; Naismiths, a construction consultant; Rose Project Services; Dunlop Heywood and Nolan Associates. Here’s how the final three are doing …

Rose Project Services

“We had a party after we bought the firm back from Erinaceous’ administrators”, says Chris Lowe, director of the Gloucestershire project manager and cost consultancy. “Our staff were just happy to be back in the land they knew.” Lowe declines to reveal the firm’s staff numbers or turnover but insists that after “significant rationalisation of staff”, it is doing well and will grow 15% next year.

Erinaceous owned Rose for two years and Lowe does not look back on the period fondly. “The thing I liked least was that when you’re part of a plc you have to do work just to get turnover, and clients have to pay you for an army of accountants and legal advisers on top of the service you give them.”

Once out of Erinaceous, “we didn’t know we were heading into a global financial crisis but we were in pretty good shape. We’d never done much in the public sector. The commercial development world has taken a hit, but we do a lot for Walmart and we’ve been finishing some big developments like the Swan shopping centre in Eastleigh. We’re also fronting the World Cup bid for Plymouth FC’s stadium and we’re on the [£90m] Brighton Marina. I’m not saying next year won’t be difficult but we’re looking ahead confidently.”

Dunlop Heywood

Dunlop Heywood director Stuart Hicks says he still works with the other firms that survived Erinaceous in an informal network: “There is a group of us who went through the worst of times together and that creates a bond. There’s a pool of alumni I can call on, say, if I need a contact in a particular city, and we go out for the odd drink.”

The commercial property consultancy, formerly Dunlop Haywards, has had a rough ride. Ian McGarry, its former head of valuations, was being investigated for fraud just as Erinaceous was crumbling, leading in February 2009 to a court ordering the then-collapsed Dunlop Haywards to pay £21m in damages to Cheshire Building Society.

Dunlop Heywood - which was formed as a new company in May 2008 by Hicks and another former Dunlop Haywards director, Nigel Davis - has put all this behind it. Hicks says: “There was a 12-month period a large number of us would rather forget but we relaunched with a similar name - actually the company’s original name dating back to 1882 - as a lot of people didn’t want to see it go.”

After setting up in Manchester with three people, the business has grown to 14-strong with offices in London, York and Abu Dhabi, with an associated office in Warsaw. “We lost half our contracts, but we’ve had fantastic loyalty from good clients, like Peel Holdings, Sellafield and Little Chef,” Hicks says.

The firm is turning over £1m and targeting 25% profit this year.

Nolan Associates

John Nolan and four other directors bought the Birmingham civil and structural engineer out of administration two-and-a-half years ago. Nolan had 50 employees and a £4m turnover at that time, but this has shrunk to 30 and £1.5m. Nolan blames this on the recession rather than the Erinaceous debacle. He says the firm kept all its clients after the buyout and continues to work in PFI schools, and has not suffered from cuts to the Building Schools for the Future programme, while its value engineering service for contractors is “growing out of all proportion”.

He says: “I’m optimistic. We basically launched a business in the worst construction recession we’ve ever had and we’re getting through it.”