Connaught, which carries out essential maintenance and repairs to homes, called in administrators on Tuesday to its main social housing unit after government cuts caused contract deferrals that spiraled into financial difficulties.
Approximately 2,500 employees at the unit will transfer to Morgan Sindall's affordable housing division, Lovell, and maintenance services will continue without interruption said the company in a statement on Friday.
Administrator KPMG said earlier this week it would sell the unit's contracts and warned of potential redundancies amongst the unit's 4,400 staff.
KPMG added on Friday that it was looking to sell off or transfer the remaining contracts to other providers after its swift deal with Morgan Sindall.
"(We) remain hopeful that more staff will transfer as part of this process," said Richard Heiss, a restructuring partner at KPMG and joint administrator.
Morgan Sindall Executive Chairman John Morgan told Reuters last month that its housing business could benefit from the woes of Connaught.
Morgan Sindall, whose affordable homes unit has 1,500 employees, said the assets were bought at a discount to their net book value.
The acquisition will significantly bolster Morgan Sindall's social housing maintenance operations, which contributed 3 million pounds of revenue to first-half results.
The deal follows hot on the heels of its acquisition of social housing maintenance service provider Powerminster Gleeson Services for 6.6 million pounds.
Connaught's contracts will add 200 million pounds to annual revenue.
"This is a step change for Lovell. The acquisition significantly increases the scope and scale of our planned and reactive maintenance activities," said Chairman Morgan, who co-founded Morgan Lovell in 1977 before it combined with William Sindall in 1994.
"Strategically this looks to be a sensible move for the group as it has a strong position in social housing in Lovell, and it was punching below its weight there," Panmure Gordon's Andy Gordon said in a note.
However, he warned that management may have to convince investors that it has done the appropriate due diligence.
"Clearly there will be some nervousness over exactly what the group is buying, but it has proved before that it can deliver on 'tricky' acquisitions," he added.
Demand for new social housing and refurbishment has remained firm according to Morgan Sindall's trading update in July.
Exeter-based Connaught has two remaining businesses that provide environmental support services and health and safety compliance advice, with a total of 4,500 staff.
Connaught shares were suspended from trading on Tuesday while shares in Morgan Sindall were up 9.6 percent at 727.95 pence by 0843 GMT.
