The entrepreneur Emma Harrison has made £20m from the sale of her controversial welfare-to-work business A4e.
She sold the Sheffield business to Staffline Group in a deal worth £34.5m. The new owners said the A4e brand is “too tarnished” and will be relaunched as People Plus.
Ms Harrison declined to comment when contacted by The Yorkshire Post today.
Her lucrative exit is the latest twist in the 50-year-old’s career.
Ms Harrison founded A4e in 1991 to provide training for those left unemployed by the decline of the steel industry in Sheffield.
The business expanded as it won major welfare-to-work contracts from both Labour and Conservative-led governments.
In 2010, Prime Minister David Cameron appointed Ms Harrison as his “family champion” to help get long-term unemployed people back into work.
But in 2012 Ms Harrison quit the advisory role and stepped down as chairman of A4e after fraud allegations emerged at the company. There has never been any suggestion of wrongdoing on her part.
She also faced criticism from MPs over an £8.6m dividend the taxpayer-funded company paid to her in 2011.
An investigation into fraud allegations concluded with 10 convictions at Reading Crown Court last month. Six people were sent to prison and a further four received suspended sentences.
The company was also subjected to audits by the Department for Work and Pensions and the Skills Funding Agency as well as an internal review by global law firm White & Case LLP.
Andy Hogarth, chief executive of Staffline Group, said A4e has spent £8m in the last three years on improving internal controls.
The Sheffield company’s biggest customer continues to be the Department for Work and Pensions through its Work Programme.
A4e also has contracts with 14 local authorities, the Skills Funding Agency, the Ministry of Justice and the Money Advice Service. Its turnover was £140m in the year ending March 2015. It had pre-tax profits of £10.2m.
Staffline agreed to acquire A4e’s entire issued share capital for £23.5m and will assume A4e’s net debt of £11m.
The consideration of £34.5m represents a multiple of two-and-a-half times A4e’s 2015 earnings before interest, tax, debt and amortisation.
Mr Hogarth said the rationale for the acquisition is “to get a better footprint across the UK in terms of welfare to work... and offer a better service to our customers”.
He said the A4e brand “unfortunately is too tarnished” and the group’s customers and staff are happy with the change to People Plus. “Their effort and enthusiasm will continue,” said Mr Hogarth. A4e employs 2,200 people.
The combined turnover of the two businesses will reach £650m this year, he added. The enlarged group aims to hit £1bn by 2017.
Mr Hogarth said a change of government would not affect the need to get unemployed people back into work.
UK unemployment has fallen to 1.8m but the number of those receiving incapacity benefit has remained stable at around 2.4m.
He said the group’s next contracts would be focused on helping those people.
A team at accountancy firm Deloitte led by Martin Jenkins advised Ms Harrison on the sale of the business. She held an 85 per cent stake in A4e.
Mr Jenkins, practice senior partner, said: “This acquisition makes great strategic sense for both companies creating a clear market leader and providing a base for further development.
“The management team at A4e have done an excellent job in developing A4e and building an attractive platform which will create more opportunities for its people under Staffline’s ownership.”
Andrew Dutton, chief executive at A4e, said: “We are today starting a new chapter in the history of A4e.
“Staffline is exactly the right fit for us: its ambitions, robust financial position and its people and business values will all support the combined business as we grow together and build on our position as a leading Work Programme provider in the UK.”
When contacted by The Yorkshire Post, Ms Harrison said: “I’m sure you’ve had all the press releases. Thanks for calling, bye.”
It is thought that she will devote her time to charity work.
Risk for Staffline is execution
Following the acquisition of A4e, Staffline will become of the largest providers of the Work Programme in the UK.
The Aim-listed group said it will have the greatest geographical reach of all providers with more than 150 locations across the country.
A4e will be integrated into Staffline’s existing welfare-to-work business, which will be led by Rod Jackson. Andrew Dutton, chief executive of A4e, will work with Staffline for an initial period before leaving the business.
Robin Young, A4e’s non-executive chairman, and the other non-executive directors Neil Macdonald and Sarah Andersen will step down from their roles with immediate effect.
Analysts at Charles Stanley said: “The reason for A4e selling is that given its legacy issues, management felt it would be difficult to grow the business and win new contracts, hence the company would benefit from new ownership.
“The risk for Staffline is execution. Its existing contracts all perform in the top half for all providers, whereas A4e contract’s all perform in the bottom half. The challenge to Staffline is to improve this performance.”