Carillion: High debt, mismanagement and increased political risk
The UK-based construction and services firm Carillion went into liquidation in January 2018, with debts of over £1 billion, just £29 million cash in the bank, and a pension deficit of over £500 million. It caused a scandal that was political as well as commercial. Public inquiries and a review of UK-based auditors have been direct consequences. Causes of the collapse were high debt levels, a complex company structure and low margins on large public sector contracts. The Board did not respond to the overt warnings of a major shareholder three years earlier. Just 10 months before, the annual report had given an upbeat report on the company’s position and prospects. The case study focuses on four dimensions: Strategic management – Carillion’s strategy of growth through acquisitions funded by borrowing, was high-risk. Corporate governance – The board did not challenge executives over risk or debt. Financial accounts – Aggressive accounting hid liabilities, that were missed by auditors; complacent assumptions around the valuation of goodwill were evident. Political risk – The scandal shook the assumption that private sector management was inherently superior, and nationalization gained public support in the UK.
- The case study provides a rare opportunity to explore the dynamics of a board that failed to identify strategic risks, and who missed warning signs, both oblique and explicit.
- There are also learning opportunities around the valuation of goodwill, and auditing of complex accounts. Much detail is in the public domain, following a major Parliamentary inquiry.
Carillion, Construction and Engineering, Services, Facilities Services
20 years, but with a particular focus on later period 2015-2018
Cranfield University
Wharley End Beds MK43 0JR, UK
Tel +44 (0)1234 750903
Email [email protected]
Harvard Business School Publishing
60 Harvard Way, Boston MA 02163, USA
Tel (800) 545-7685 Tel (617)-783-7600
Fax (617) 783-7666
Email [email protected]
NUCB Business School
1-3-1 Nishiki Naka
Nagoya Aichi, Japan 460-0003
Tel +81 52 20 38 111
Email [email protected]
IMD retains all proprietary interests in its case studies and notes. Without prior written permission, IMD cases and notes may not be reproduced, used, translated, included in books or other publications, distributed in any form or by any means, stored in a database or in other retrieval systems. For additional copyright information related to case studies, please contact Case Services.
Research Information & Knowledge Hub for additional information on IMD publications
Ten years from now, we’ll know which companies best navigated geopolitics. And the hunt will be on for enduring lessons. Which firms made the smartest adjustments to their global commercial footprint by exiting certain markets, doubling down on ot...
Brookfield’s Catalytic Transition Fund is a case study in how the financial industry can spearhead sustainable development. Brookfield Asset Management announced an initial closing of $2.4 billion for the Catalytic Transition Fund, marking a signi...
LPX AG, founded in 2004 by Michel Degosciu and Robin Jakob, is a leader in listed alternatives, focusing on listed private equity (LPE) and listed infrastructure. With its pioneering LPX Listed Private Equity Index series and NMX Infrastructure In...
Research Information & Knowledge Hub for additional information on IMD publications
in I by IMD 5 February 2025
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
Research Information & Knowledge Hub for additional information on IMD publications
in Binder, Julia Katharina (Ed.); Haanaes, Knut Bjarne (Ed.) / Leading the sustainable business transformation: A playbook from IMD, pp. 137-150 / Hoboken: Wiley, 2025
Research Information & Knowledge Hub for additional information on IMD publications