Business Services Sector Comment – February 2015

Dato

There has recently been a spate of acquisitions in the recruitment sector, which has been one of the most active sectors for M&A over the last few years. In this month’s sector comment, Clearwater International provides a roundup of some of the key deals.

Matchtech, which had previously not made an acquisition since late 2013, recently announced that it has acquired leading telecoms, technology, energy and engineering recruitment firm Networkers International plc. The acquisition is a truly transformational deal for Matchtech which – prior to the acquisition – was one of the most UK-focused agencies, generating only 2% NFI overseas. Now, with the addition of Networkers International, this figure will rise to 28% and see Matchtech emerge as Britain’s fifth largest technology recruitment business. Furthermore, at an EV / EBITDA multiple of 8.3x, the €78m price tag appears to represent compelling value and is expected to be earnings accretive within a year.

The transaction follows a long string of UK-based, mid-market recruitment deals to have been announced in 2014:

  • Intermediate Capital Group acquired Education Personnel in a deal rumoured to be valued at €406m;
  • Graphite Capital, which enjoyed a 5.8x money multiple on its exit of Education Personnel, acquired James Caan’s multi-sector recruitment firm Human Capital Investment Group (HCIG);
  • Sovereign Capital acquired healthcare recruiter and domiciliary care provider Nurse Plus;
  • Impellam had a busy year, announcing the acquisition of both specialist technology recruiter Lorien Resourcing for €87.5m and education recruiter Career Teachers for €30.2m;

Unsurprisingly, it is not just the UK market that is seeing very high level of deal activity. In December, Hays plc announced the acquisition of US-based IT recruiter Veredus Corporation for €38m. This is the first acquisition that  Hays has made in over five years and follows strong global trading performance. Interestingly, the structuring of the deal is fairly unique and follows a private equity-like model with management retaining 20% equity and an opportunity to enjoy the upside post sale.

In other notable overseas transactions: Recruit Co. Ltd, Japan’s largest recruitment company which recently successfully completed a €1.8bn initial public offering, has made an offer to acquire Chandler Macleod Group this month. Chandler Macleod is one of the leading recruitment agencies in Australia and is listed in the Australian Securities Exchange. The group generated revenues of €977.9m and an EBITDA of €23.8m for the 12 months to June 2014. The acquisition is part of Recruit’s bid to expand its overseas revenues from 22% to 50% over the coming five years.

In the US: TrueBlue Inc acquired Seaton Corp, a Chicago-based recruiting and outsourcing provider through its PeopleScout, HRX, Staff Management and StudentScout brands. The €229m acquisition, which closed in June, has created the largest industrial staffing firm in the country. Finally, in the last couple of weeks, troubled executive search firm CTPartners has received a bid from Chicago rival DHR International. CTPartners – which has become embroiled in a sexual discrimination scandal, faces serious cash flow problems and recently pulled a €10.9m stock sale – is currently reviewing the proposed offer.

An interesting dynamic to watch through 2015 will be the level of financial versus trade buyers. For the past two years, private equity has dominated the spotlight – however, with a large number of private equity funds having already acquired a recruitment sector platform, we expect their attention to turn to other sectors. As such, it is likely that we will see a resurgence in the level of deals completed by well-capitalised trade acquirers.

Recruitment is a sector we know only too well at Clearwater International, having completed five recruitment deals in 2014. Most recently, we advised Sovereign Capital on the acquisition of Nurse Plus which followed the sales of GatenbySanderson, Sugarman Group, Q-Star Energy and Vision for Education. In addition to these completions, we are actively working on a number of other mandates and continue to hold regular dialogue with both trade and financial buyers.

 

Notable Business Services Deals

Capita plc, the listed UK-based provider of business process outsourcing services, management consultancy and finance & treasury management, has agreed to acquire Constructionline, the UK-based company that provides procurement and supply chain management services, from The Department for Business, Innovation & Skills, the UK-based government department for economic growth, for a consideration of €47.3m on a debt free, cash free basis.

Saga Group plc, the listed UK-based provider of travel, financial, healthcare and media products and services, has acquired Bennetts, the UK-based company engaged in providing motor cycle insurance services, from BGL Group Ltd (BGL), the UK-based company engaged in providing personal lines insurance brokerage services, for a cash consideration of €35.5m.

Thornley Groves Ltd, an estate agents chain, has agreed to acquire Shepherd Gilmour LLP, a provider of construction consultancy services.

ISS UK Ltd acquired the UK, Ireland and European operations of engineering firm GSH Group plc to enhance its technical services capability. GSH achieved revenues of approximately €97.4m in the year ending 31 December 2014 and employs c. 800 staff.

Reconomy UK Ltd, the UK-based company engaged in providing waste management and recycling services – and a portfolio company of Bregal Capital LLP, has acquired Countrywide Waste Management Ltd, the UK-based company engaged in providing waste analysis and removal services, for an undisclosed consideration.

Willis Group Holdings plc and Miller Insurance Services LLP have agreed to form  joint venture. The new entity will comprise the wholesale and speciality businesses of Willis and Miller, with Willis holding an 85% interest in the joint venture while the remaining 15% interest will be retained by the partners of Miller.

LDC (Managers) Ltd along with the management of National Exhibition Centre Group has acquired the company from Birmingham City Council in a management buyout transaction. LDC, the UK-based private equity firm, will pay a consideration amount of €415.2m.

Cinven Partners LLP, a UK-based private equity firm, has agreed to acquire Premium Credit Ltd, the UK-based speciality finance provider, from US-based private equity firm GTCR LLC for a total consideration of €624.8m.

US-based Providence Equity Partners LLC has acquired Clarion Events Ltd, the UK-based company engaged in organising exhibitions, trade shows, events and conferences, from Veronis Suhler Stevenson and Trilantic Capital Partners LLP, both US-based private equity firms, for a consideration of €284m.

Pureprint Group Ltd, the UK-based company engaged in offering commercial printing services – and a portfolio company of Business Growth Fund plc, has acquired an undisclosed majority stake in Imprint Group, the UK-based manufacturer and supplier of point of sale, point of purchase and large format outdoor media, for an undisclosed consideration.

Covergint Technologies LLC, the US-based company engaged in integration, design, installation and maintenance of facility systems – and a portfolio company of US-based private equity firm KRG Capital Partners, has acquired Beacon Security and Communications Ltd, the UK-based provider of security solutions and security services, for an undisclosed consideration.

Ekokem Oy Ab, the Finland-based company engaged in recycling and waste management, has acquired Nord Group A/S, the Denmark-based company also engaged in recycling and waste management, from EQT Infrastructure I, the Sweden-based private equity fund of EQT Partners AB.

Prime Technology Ventures, the Netherlands-based venture capital firm, has acquired a 30% stake in Digital Origin Technology Ltd, the UK-based company engaged in providing financial services via the Internet, for an undisclosed consideration.

Sodexo SA, the listed France-based food and facilities management services provider, has acquired the aircraft cabin cleaning operations at Copenhagen airport owned by SAS AB, the listed Sweden-based provider of air transport and related services, for an undisclosed consideration.