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Balfour Beatty is in talks to buy failed northern contractor Multibuild, with a deal possible within a week.

It is understood that Balfour is in exclusive talks to buy the 拢70m-turnover firm, which went into a company voluntary arrangement (CVA) in December after running into financial difficulties.

A deal would bolster Balfour鈥檚 presence in the lucrative budget hotels market, and would increase its capacity for fit-out work in areas such as education. A source close to the situation confirmed that Balfour was in talks with the Stockport-based company, but emphasised that 鈥渋t could still go either way鈥�.

It is understood that some parts of Multibuild, which suffered from problem contracts, would be closed down if a deal went ahead, with Balfour taking the rest of the group. Balfour is expected to pay a minimal sum for the company, with one source saying it could go for 鈥渟ignificantly below 拢10m鈥�.

Sources said they expected most of Multibuild鈥檚 senior management to remain with the business. According to its last accounts, it employed 156 people.

A deal for the firm, founded by chief executive Mike Peden and director Tony Short in 1983, would be the second time Balfour has swooped for a regional contractor within a month, after its surprise 拢10.3m purchase of South Yorkshire-based Strata Construction on Christmas Eve.

Balfour is expected to pay a minimal sum, and it could go for 鈥榮ignificantly below 拢10m鈥�

It is understood that Balfour, which earlier this month reached financial close on the 拢450m Blackburn and Darwen 好色先生TV Schools for the Future scheme, would use Multibuild to do interiors work on some of its education jobs in the Manchester region. The smaller firm also has a strong reputation with companies including Whitbread and Travelodge in the budget hotels sector.

A statement from Multibuild鈥檚 directors, filed at Companies House on Christmas Eve, stated that they had 鈥渞esolved to wind up the company鈥� once its CVA ended. The accounts for the year to 30 September 2008, the latest available, showed a pre-tax loss of 拢4.4m compared with a pre-tax profit of 拢1.1m the year before. The CVA is being handled by insolvency specialist Leonard Curtis.

Multibuild blamed its problems partly on two unnamed major contracts, which had been hit by delays after difficulties with the supply of modular units.

A source at a rival contractor said: 鈥淚t obviously had some jobs that didn鈥檛 go well, but I think it stretched itself a bit, too. If you do that, you lose some of the controls in the business.鈥�

Balfour Beatty declined to comment.