Business Services Sector Comment – January 2016

Date

As the recruitment sector has returned to growth and industry participants have recorded high levels of profits, M&A has once again become an integral part of leading players’ growth strategies. Clearwater has extensively reported on the M&A trends in the sector, with a particular focus on the high level of sector specific in-fill acquisitions trade players are making. This month, however, was slightly different as the industry witnessed one of the largest mega-deals in the last decade.

Recruit Co, which is aiming to become the leading global staffing company by 2020, made a bid to acquire USG People for €1.42bn. The deal is the largest seen since Dutch-based Randstad Holding NV acquired its domestic rival Vedior NV for €3.5bn and will see Recruit Co assume the position of fourth largest staffing firm in the world, displacing Allegis Group. The acquisition is believed to be highly strategic for Recruit Co which will broaden its footprint across Europe, particularly in the Netherlands, Belgium, France and Germany where USG generates close to 100% of its revenues.

The deal is further evidence that some of the largest global staffing firms are starting to put their cash to work through strategic M&A. The “big 3” (Adecco, Randstad and Manpower), which have all adopted a fairly cautious approach to acquisitions in the last 5 years, are back looking at opportunities that bolster territorial growth or sector solutions. Manpower’s acquisition of 7S Group is a prime example: the deal, announced at a purchase price of €136.5m, provides Manpower with €1bn revenue run rate in the attractive German market and lifts the company to number 3 in terms of market share behind Randstad and Adecco.

Here at Clearwater, we think the recruitment sector is poised for a number of interesting years. A selection of private equity investments are drawing to the end of their investment cycle and will be looking to exit; at the same time, we are aware of new funds which are still seeking that platform opportunity. Well-capitalised trade players will continue to focus their M&A on in-fill acquisitions, with an increase in cross-border deals as market incumbents look to increase their exposure to attractive markets.

 

Notable Business Services Deals

Grovepoint Capital LLP, the UK-based principal investment firm, has acquired Payzone UK Limited, the UK-based company involved in the installation and maintenance of Payzone-owned terminals, for a consideration worth €45m.

Lloyd Dorfman, the UK-based private investor, has acquired a 44% stake in Doddle Limited, the UK parcel collection company, from Network Rail Limited.

Cabot Square Capital LLP, the UK-based private equity firm, has agreed to acquire UK Energy Partners Limited, the UK-based company that designs, finances, and delivers building energy solutions to reduce and control energy costs, and Net Zero Buildings Limited, the UK-based company engaged in providing design, project management, planning, building, installation and maintenance for buildings to improve their energy efficiency, from a group of various individuals.

TES Global Limited, the UK-based digital education company engaged in operating online platforms for teachers to share education resources, has acquired Smart Education Limited, the UK-based company operating as a recruitment agency for schools and teachers, for an undisclosed consideration.

Peninsula Business Services Limited, the UK-based provider of employment law and health & safety services, has acquired Croner Group Limited, the UK-based company engaged in providing human resource and business safety consultancy services.

ABM Industries Inc acquired Westway Services Holdings (2014) Ltd from Maven Capital Partners UK LLP and Mobeus Equity Partners LLP. ABM Industries Inc, the listed US-based company headquartered in New York, is engaged in providing janitorial, parking, security and engineering services. Westway Services Holdings (2014) Ltd., the UK-based company headquartered in Glasgow, is a provider of technical building engineering services.

Edif Group Management Limited – the UK-based company engaged in providing industrial testing, inspection, certification and consultancy services, and a portfolio of Phoenix Equity Partners Limited, the UK-based private equity firm – has acquired Cuerden Consulting Limited, the UK-based training consultancy engaged in analysis of organizational training requirements.

Alcumus Holdings Limited, the UK-based provider of compliance and certification services, has agreed to acquire Santia Consulting Limited, the UK-based company that provides health, safety and environmental risk management services, from Better Capital PCC Limited, the listed UK-based investment company, for a consideration of €60m.