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Adarma, one of the UK's largest independent cybersecurity companies has entered administration, resulting in 173 redundancies from its 176-strong workforce. The Edinburgh-HQ’ed firm, which provided managed security operations centre services and cybersecurity consulting to FTSE 350 companies has appointed administrators after facing ‘insurmountable financial pressures’. For such an established tech supplier to go under, especially one operating in what is a growth market, raises some thorny questions. So, what exactly happened to Adarma?
Adarma began operating in 2009 and for many years was performing well as demand for cybersecurity services ramped up, but its troubles began when Nationwide, its largest consulting client, ended their three-year contract in 2022, choosing to insource cybersecurity services instead. This contributed to revenue declining from £47.4m to £44.7m in 2023. But a small revenue decline was the least of the firms worries, post-tax losses widened from £10k to £80k, with the firm clearly struggling to demand the price premium required to meet rising costs, resulting in significant margin pressure.
The final nail in the coffin was when private equity firm and existing investor, Livingbridge, pulled funding approximately three months before administration due to the loss of major customer contracts. The directors tried to pursue a formal sale of the business in a bid to inject fresh investment, but despite the company’s strong reputation in the cybersecurity sector, nobody was willing to stump up the cash. According to insiders (as reported by The Register) ‘applicants were only interested in the client list, which was shrinking rapidly as word of the troubles spread’.
The collapse of the business itself unfolded rapidly over four days in July, with staff receiving just 30 minutes' notice on the 10th July before the business ceased trading on the 14th July. Employees discovered their devices locked the following morning, displaying messages stating the equipment had been secured by administrators.
The collapse represents a significant blow to Scotland's thriving technology sector, affecting approximately 120 Edinburgh-based staff plus others in London and remote positions. It is a sad situation for all those involved, but really highlights the importance of both a sound financial footing and clear differentiators, regardless of the market you are in. In the cybersecurity space, and increasingly also in the market for AI solutions, there are so many very similar organisations, many with very little between them in terms of what they offer. With continuing high competition and high costs for skilled personnel, other UK firms may well find themselves in a similar position unless they learn the lessons from what happened to Adarma.
Posted by: Simon Baxter at 10:05