Business Services Sector Comment – September 2016 – Recruitment

Despite much talk about the uncertainty in the market post Brexit, leading international trade consolidators in the recruitment market continue to target UK companies to build global capabilities and sector expertise.

Whilst the executive search market typically reports a lower level of deals compared to the contingent staffing market, this month saw Heidrick and Struggles (H&S) purchase London-based executive search firm JCA Group for €16.5m. The top five executive search firm has been on an acquisition spree in the last 12 months and has identified the UK, Germany and France as key territories for growth. H&S has also been buying leadership development firms as the business looks to balance revenue streams between recruitment and the less cyclical human capital management services. It is an area in which its major competitor, Korn Ferry, has also been particularly acquisitive. In November last year the company completed its largest deal to date, with the purchase of Hay Group for €409m.

In September, another deal announced was that of Randstad’s acquisition of Monster Worldwide, one of the world’s largest online job boards. Despite the attractive purchase price (€387m, c.10x EV/LTM EBITA), the move has been met with mixed reaction with the strategic rationale being questioned. Once the largest recruitment website in the US, Monster’s core business is in structural decline as reflected by its share price which was down 62% over the 12 month period prior to the deal announcement. The company has struggled to compete with new entrants such as professional social network LinkedIn (sold to Microsoft for €23bn in June). Randstad is now expected to limit its future M&A activity in the medium term to c. €100m per annum, while it focuses on integrating recent acquisitions and keeping Net Debt/EBITDA below 1.5x.

Clearwater International has a strong and proven track record in the recruitment sector, recent transactions have included advising social work recruitment consultancy Liquid Personnel, on its sale to healthcare staffing provider Independent Clinical Services (ICS); and pharma CSO CHASE on its recapitalisation, with investment provided by private equity firm Vespa Capital.

Notable Deals

SG Fleet Group Ltd, the listed Australia-based company providing vehicle leasing and fleet management services, has acquired Fleet Hire Ltd, a UK-based contract hire, fleet management and salary sacrifice provider, for €30.5m.

LDC, the UK-based mid-market private equity firm, along with the management of ByBox Holdings Ltd, the UK-based field service logistics and supply chain technology solutions provider, have acquired the company in a management buyout transaction, for an enterprise value of €123.7m.

NorthEdge Capital, the UK-based private equity firm, has acquired a significant majority stake in Abbey Logistics Group Ltd, a UK-based niche logistics provider specialising in the transportation of bulk food products, in a management buyout transaction, for an undisclosed consideration.

Pell Frischmann Ltd, a UK-based multi-disciplinary engineering firm owned by Germany-based investment trust RAG-Stiftung, has acquired UK-based mechanical and electrical specialist Desco Ltd, for an undisclosed amount. The transaction marks the first acquisition under its ambitious plans to build a group of market-leading engineering consultancy firms.

Global University Systems (GUS), the Netherlands-based education group, has acquired Arden University Ltd, a UK-based provider of university qualifications by distance learning, from US-based Capella Education Company, for €17.3m. The deal comes after GUS bought the University of Law from Montagu Private Equity last June for an undisclosed sum.

Journey Group plc, the listed UK-based catering services and in-flight products firm, has agreed to be acquired by Jaguar Holdings Ltd, a special vehicle formed by private investment house Harwood Capital LLP. The transaction values Journey Group at €33m.

Blackhawk Network Holdings, Inc., the US-based prepaid and payments company, has agreed to acquire The Grass Roots Group Holdings Ltd, a UK-based employee and customer engagement solutions provider, from WPP plc, current and former management, for approximately €106m. Grass Roots is expected to generate EBITDA of nearly €13m in 2016.

ManpowerGroup Inc., the listed US-based staffing and workforce solution provider, has agreed to acquire Ciber Norge AS, the Norwegian business of IT consulting services and outsourcing company Ciber Inc, for €6.3m. The deal is subject to regulatory approval, and follows ManpowerGroup’s acquisition of Ciber Netherlands in June for €22m.

Inspired, the UK-based operator of premium schools in Europe, Australia, Africa and South America, has agreed to acquire International School of Europe s.r.l. (ISE), an Italy-based group of international day schools, from H.I.G. Europe, the European arm of global private equity firm H.I.G. Capital.