Human Resource Services - Western...

M&A INTERNATIONAL INC.

Human Resource Services:A Sector Well Placed for Increased M&A Activity

2013

www.mergers.net

2M&A International Inc. - the world’s leading M&A alliance

Table of Contents

1. Executive Summary ............................................................................................................................................................................... 3

Review of M&A Activity (2010–Q1 2013) .......................................................................................................................................... 3

Looking Ahead ................................................................................................................................................................................. 4

2. Overview ................................................................................................................................................................................................ 5

HR Services Trends and Leading Macro-Economic Factors ............................................................................................................. 7

Drivers of M&A Activity .................................................................................................................................................................... 8

3. M&A Overview & Analysis ..................................................................................................................................................................... 9

Analysis by Deal Value and Volume ................................................................................................................................................. 9

Deal Analysis by Type of Targets ................................................................................................................................................... 10

Regional Deal Analysis by Value and Volume ................................................................................................................................ 13

M&A Targets: Private vs. Public Companies .................................................................................................................................. 15

M&A Deal Makers .......................................................................................................................................................................... 15

Most Active Buyers by Industry Type ............................................................................................................................................. 17

What Are Buyers Buying? .............................................................................................................................................................. 17

4. Forward Looking Themes ................................................................................................................................................................... 18

The Mining Boom, a Bane for the Australian HR Services Industry ................................................................................................ 18

Private Equity Groups (PEGs) Are Here to Stay ............................................................................................................................ 18

Middle Market Seeking Attention ................................................................................................................................................... 18

Regulations Framing HR Services Demand Story .......................................................................................................................... 19

HR Services Companies Continue Going the Outsourcing Way ..................................................................................................... 19

Internationalization of Asian HR Services Firms............................................................................................................................. 20

5. Conclusion ........................................................................................................................................................................................... 21

6. About M&A International Inc. .............................................................................................................................................................. 22

7. Main M&A International Inc. Business Support Services Specialists .............................................................................................. 23

8. Representative Transactions .............................................................................................................................................................. 24

Transactions Closed by Members of M&A International Inc. .......................................................................................................... 24

Major M&A Transactions Mentioned in this Report ........................................................................................................................ 25


Executive SummaryHUMAN RESOURCE SERVICES | 2013 1Review of M&A Activity (2010–Q1 2013)

The stabilizing global economy, improving employment market conditions and increas-ing demand for temporary staffing have led to a substantial increase in mergers and acqui-sitions (M&A) in the global Human Resource (HR) services industry. Post 2009-2010, the improving performance of companies in the industry has resulted in a reasonable level of average valuation multiples, making the HR services market attractive for acquisitions and divestments. In the near term, this trend is likely to continue, leading to a strength-ening of EBITDA multiples and valuations across the HR services industry, thus making the future market appealing for M&A.

The HR services sector has a clear corre-lation with changes in GDP and the unem-ployment rate, with temporary unemploy-ment being the leading indicator. The HR services sector tends to perform well when annual GDP growth is strong and/or the un-employment rate is declining. The industry coincides with the economic cycles of the country. The beginning of a cycle, i.e. when the economy recovers, is characterized by increased temporary employment, which is needed to meet the increasing demand for goods and services. As corporations become confident of economic recovery, preference for a permanent workforce increases, while as the cycle matures and the economy slows down, firms reduce their temporary work-force. The global economy is currently at the mid-point of the recovery cycle, which ex-plains the current rise in demand for tempo-rary employment and increased M&A activity to acquire temporary staffing firms.

Between 2010 and Q1 2013, the HR servic-es industry recorded 387 M&A deals worth $6.1bn. After a modest post-recession re-vival during 2010 and 2011, the peak of this activity (based on M&A deal volume) was seen in 2012, with volumes reaching an all-time high as recovery of the global economy became eminent. Also valuations reached

their maximum levels in 2012, with the median EBITDA multiple rising to 9.8 times from 7.0 times in 2010. Most of these deals have been relatively small in size, with the median revenue of targets at $27.2mn, and the median transaction value at $4.1mn.

Since early 2011 employment conditions have been improving globally, resulting in an increased demand for HR services. From 2010 to Q1 2013, North America led in terms of overall M&A activity, accounting for a total deal value of $2.8bn, followed by Asia Pacific ($1.8bn) and Europe ($1.4bn). Furthermore, firms catering to general staff-ing accounted for the largest share of M&A activity (54.7%), followed by professional/specialist staffing firms (31.2%) and execu-tive search firms (14.2%).

Over 2010–Q1 2013, the demand for pro-fessionals with a specific skill set and quali-fication significantly increased. The share of professional/specialist staffing firms (as targets) in total M&A activity increased from 28.4% in 2010 to 33.8% in 2012. The de-mand for such professionals came primarily from sectors such as information technology

(IT), oil & gas, and healthcare. The acquisi-tion of professional/specialist staffing firms was most prominent in the mature markets of the US and Europe where IT and health-care staff are the most in demand, although a lack of skills persists. HR services firms have acquired an increased importance based on the need to reduce this gap in demand and supply. In Europe, particularly, it has become very difficult to find the right talent, especially across the IT and engi-neering sector. According to the European Commission, there will be between 300,000 and 800,000 IT-related vacancies across Europe by 2015.

Apart from the role of HR firms in reducing the skill gap, other important factors that drove M&A activity include the need to grow in “professional/specialist staffing” (as seen in the acquisition of TMC Group by Gilde Buy Out Partners), diversification of product offerings (the acquisition of Allgeier SE by Oxygen Consultancy and ProfiPower by Randstad Hungary), and geographic ex-pansion (the acquisition of REACH HR by ManpowerGroup and Right4staff Holdings by Gi Group).


Executive SummaryHUMAN RESOURCE SERVICES | 2013 1The role of private equity group (PEG) play-ers who were reasonably active buyers in the HR services M&A landscape during 2010–Q1 2013 is also vital. These players reaped good profit on their investments. Therefore, they are likely to increase their acquisition activities in the next three to five years.

Looking Ahead

Furthermore, large and small HR services firms are expected to follow the M&A route to diversify their service offerings. Firms focused on delivering specialized services rather than traditional HR services will con-tinue to grow their market share. The evolv-ing set of HR services and HR servicing models such as social media recruitment, research process outsourcing (RPO) and managed service providers will shape the HR services industry in the future.

Finally, the growing demand for profes-sional/specialist and temporary staffing will continue to provide impetus for the acqui-sition of companies offering this service. The prevalence of temporary staffing is still at low levels. This is set to increase as companies operating in an uncertain post-recession environment favor a temporary workforce over permanent staffing. In addi-tion, professional/specialist staffing, being a high margin business, is gaining an increas-ing share of services offered by HR services firms. In the HR services space, the boost in demand for temporary and professional/specialist staffing has influenced M&A activ-ity and is expected to increase further.

Positive Outlook

“Amid the recovering global economy, the near-term outlook for M&A activity in the HR services sector is positive. Cross-border buying will continue to rise as HR services firms continue to seek a greater geographical reach to cater to their increasingly global client base. As PEGs complete their investment cycles, a significant comeback from these set of buyers for more acquisitions is expected in the next 3–5 years.”

Jonas P. Knudsen Head of M&A International Inc.’sBSS Group


HUMAN RESOURCE SERVICES | 2013 2Overview

The global Human Resources (HR) services1 industry grew at a compound annual growth rate (CAGR) of 3.4% during 2010–2012 to nearly $386bn. On the basis of our analy-sis and, as largely defined by leading HR services firms, the HR services industry is broadly structured under three key segments:

1. General staffing: predominantly involves placement services for lower wage, less-skilled workers with secondary education or equivalent. It is the largest segment of HR services and includes employment of workers in manufacturing units, construc-tion sites, etc.

2. Professional/specialist staffing: includes recruitment, staffing and placement ser-vices for higher educated people in middle and senior management positions such as supervisors, managers, professionals, teachers and consultants. These profes-sionals/specialists have vocational, uni-versity or higher education qualifications or possess a specialized skill set.

3. Executive search: comprises staffing and placement services for senior level executives such as directors and CEOs.

Of these, general staffing is the most lucra-tive segment of the industry, accounting for a market share of approximately 70% with a value of $264bn in 2012. Geographically, North America is the most preeminent re-gion in the HR services market, followed by Japan and the United Kingdom (UK) & Ireland.

The HR services industry is highly frag-mented with the top three players, i.e. Ad-ecco, Randstad and Manpower, accounting for just an 18% share, while, in 2012, the top 10 companies contributed a 25% share to total industry revenues. Most companies in the industry are active in a few service segments. The biggest three global players,

General StaffingProfessional/Specialist StaffingExecutive Search

257.5 278.5 263.592.9 111.4 109.3

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32% North AmericaJapanUK & IrelandFranceGermany & AustriaRest of EuropeOther

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AdeccoRandstadManpowerOthers

Figure 1: HR services market by service segments, 2010–2012

Figure 2: HR services industry break-up by geography and players, 2012

Note: Average exchange rate of €/$: 1.3267 (FY2010),

1.3049 (FY2011) and 1.2856 (FY2012).

Source: Randstad and Adecco Annual Report,

Evalueserve Analysis

Source: Randstad and Adecco Annual Report, Evalueserve Analysis

1 The global HR services market primarily includes the three core sub-segments: general staffing, professional/specialist staffing and executive search. It also includes other services such as outplacement services, recruitment process outsourcing, managed service providers, etc. However, such other services constitute a relatively small segment of this market, and are not the focus of our analysis.

Regional break-up

Market share


HUMAN RESOURCE SERVICES | 2013

for example, are largely focused on general staffing services, which accounts for 60 to 75% of their revenue. In addition to global players operating in focused segments, smaller, mid-size and regional players provide services spread across the entire spectrum of the HR services industry. Fur-thermore, companies catering to a particu-lar service segment also operate in the HR services industry. Examples include Robert Half International Inc., a US-based HR ser-vices company that specializes in executive recruiting, or firms catering to a particular geography, such as Temp Holdings Co. that offers HR services in Japan.

Players in the HR services industry largely operate in a low margin environment. As seen in the table below, during 2012, key players largely operated at a gross profit margin of 16 to 18%. The temporary staffing industry is highly competitive and has low entry barriers, resulting in lower margins.

With the prevailing uncertain economic conditions in which companies remain cau-tious of investment in fixed employment, the demand for temporary staffing has further increased. Adecco, the largest HR services provider, continues to rely on temporary staffing, which accounts for nearly 91% of its revenue.

According to Staffing Industry Analysts (SIA), in the US, temporary staffing grew 13% and 7% in 2011 and 2012, respec-tively, and is expected to grow 6% in 2013 to $106bn. Similarly, the European region largely relied on temporary staffing during the tough economic times.

According to Eurostat, the average share of temporary hiring in the EU27 has been almost 60% during 2011–12. The temporary staffing industry largely follows the head-winds of business activity and is a leading indicator of global economic activity.

2Overview

Source: Company websites, Evalueserve AnalysisNote: The geographic presence is in no specific order of operations/scale.

Table 1: Landscape of the global HR services industry (2012, in $bn)

Key players RevenueGross profit

marginBusiness description Geographic presence

Adecco S.A. $26.4 17.9%

A Switzerland-based staffing firm that provides general staffing services to office and industrial sectors, along with professional/specialist staffing services to sectors such as information technology (IT), finance, legal and medical

North America, Western Europe, the Nordics, Japan, Aus-tralia, New Zealand and emerging markets

Randstad Holding NV

$21.9 18.2%

A Netherlands-based firm and the world’s second-larg-est provider of HR services, offering general staffing services, placement of professionals, on-site workforce management and other HR solutions, such as payroll and outplacement services

North America, the UK, France, the Neth-erlands, Germany, Belgium, Luxembourg, Iberia and other European countries

Manpower Inc. $20.7 16.6%

A US-based HR services company that provides services such as workforce solutions, professional/specialist staffing as well as placement, temporary and permanent recruitment and staffing, assessment, train-ing and development, and career management

The Americas, North-ern Europe, Southern Europe, France, Italy, Asia and the Middle East

Kelly Services Inc.

$5.5 16.4%A US-based staffing firm that provides commercial, technical, professional/specialist staffing as well as outsourcing and consulting services

The Americas, Europe, Asia Pacific, the Middle East and Africa



Overview 2HR Services Trends and Leading Macro-Economic Factors

The HR services industry is cyclical in na-ture and is also indicative of a country’s economic cycles. Even more symbolic are the trends in temporary and contract staff-ing employment, which emulate the ripples of the economy. A brief analysis of the past two recessionary cycles in the US, Mar’01–Nov’01 and Dec’07–Jun’09, indicate that a directional change in temporary staffing “led” the changes in non-farm employment2 and GDP by a couple of months.

As shown in Figure 3, at “Stage I”, tempo-rary employment had already started de-clining, representing the onset of the reces-sion. However, non-farm employment and real GDP continued to rise. It was only at “Stage II” that non-farm employment, real GDP and employment showed a downward trend. At this stage, temporary employment had already registered a steep decline, depicting the deepening crisis. Similarly, at “Stage III” (Jun’09–Mar’10), while tem-porary employment had already registered its first post-recession upsurge, non-farm employment and the US employment rate continued to deteriorate, showing improve-ment only after Mar’ 10. At “Stage III”, GDP grew along with temporary employment, unlike previous stages where the lag re-lationship between these two factors was clearly evident.

Another important factor is the unemploy-ment rate, which is a strong indicator of trends in the HR services industry. As de-picted in Figure 4, unemployment rates in the US declined during the past six quarters (Oct’11–Mar’13). In the US, it declined from 8.9% in Oct’11 to 7.6% in Mar’13, while in Japan it dropped from 4.5% to 4.3%, repre-senting strong hiring levels and explaining the growth in their HR services markets.

During the same period (Oct’11–Mar’13), unemployment increased in the Eurozone,

reflecting the economic slowdown in the re-gion. However, a reversal is soon expected and employment is set to increase.

Temporary help services

Nonfarm employment

!"#$%&'#()*29/03/2013 99,4750161 102,556543 122,335716

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Figure 3: US temporary employment, non-farm employment and GDP

Figure 4: Unemployment rates (%) in major countries/geographies

Source: Evalueserve Analysis, Euromonitor

Source: Evalueserve Analysis, Eurostat

Note: Shaded area represents the recessionary period.

2 Non-farm employment denotes employment for goods production, construction and manufacturing companies in the US. It does not include farm workers, private household employees, non-profit organization employees or government employees.


HUMAN RESOURCE SERVICES | 2013 2Overview

The industry has recently started to witness growth due to a higher level of temporary hiring, which is playing a key role in reducing unemployment in the US and, to a certain extent, in the Eurozone. Furthermore, im-proving economic conditions in the US and important legislation such as the Agency Work Directive 2008, favoring the HR ser-vices industry and due to be implemented in Europe in 2013, has started to build con-fidence among the hirers and, eventually, in the economy as a whole. In addition, ac-cording to Staffing Industry Analysts (SIA), the revenue of the US HR services indus-try is expected to increase 6% annually to $139.4bn in 2014. Amid these positive sentiments, the industry looks poised for consolidation. Furthermore, given that the clients of HR firms have global operations, they now prefer to outsource their HR pro-cesses to HR companies with a global pres-ence. To better serve these clients, it has become necessary for HR services firms to expand their service offerings and operate on a global scale, primarily through M&A. Further discussions in the report manifest the rising consolidation activity in the global HR services industry. The following drivers of M&A activity clearly show the positive outlook for the industry.

Drivers of M&A Activity

M&A activity in the HR services industry is currently driven by a mixed bag of optimism and caution. While deal volumes are gradu-ally increasing, buyers remain selective about which businesses to acquire and use their balance cash carefully. Vendors too are busy shaping up their business in anticipa-tion of the right exit valuation and the most favorable timing. However, both buyers and targets foresee some proposition in the cur-rent market situation, which is guiding them towards acquiring/selling businesses. Some of these prominent market-making trends are as follows:

1. Expansion into multiple locations and at-tractive geographic markets

With businesses going global and mul-tinationals having offices worldwide, their preference for appointing a global HR services provider has increased. To fulfill this requisite from clients, HR ser-vices firms are now compelled to acquire companies with either a global reach or a strong presence in a region where the acquiror desires expansion. Internation-alization has been one of the primary drivers of M&A transactions in the HR services industry.

2. Strategy to have umbrella service offerings

Service diversification is one of buyers’ strategic rationales when looking for acquisitions. In order to strengthen their service value-chain through processes and offerings such as recruitment process outsourcing, workforce management so-lutions or professional/specialist staffing, HR services buyers resort to acquisitions. Such deals usually had relatively high multiples.

3. Target companies’ demands for a larger platform to fuel further growth

HR services firms facing the woes of recessionary cycles have shown a prefer-ence for acquisition by larger HR services companies with deeper pockets in order to continue the growth momentum of their business. These are usually small firms which are in need of either more funds or stronger management to drive their growth. Such deals have usually represented low valuation multiples and have often involved little or no cash-out to vendors.

4. Consistent activity by private equity play-ers creating an engaging M&A market

The rising interest of private equity play-ers in the HR services M&A market has bolstered overall consolidation in the HR services industry. The right timing of their investments has helped them realize good returns lately. The profitable invest-ments have further fuelled their interest in the sector.

5. Growing need for temporary staffing

As the global economy recovers from recession, businesses have laid a great emphasis on the use of a contingent workforce to maintain flexibility and ef-ficiency. With the wide use of temporary/contingent workers, many professionals and skilled workers have also become contingent workers. This has obligated HR services companies to expand into the temporary staffing landscape, primar-ily through acquisition.

Flexibility Key

“Demand in the economy is returning, slowly but surely. Highly skilled jobs like engineering and IT are still big growth areas, and employers intend to continue to increase their use of flexible staffing in the months ahead.”

Kevin GreenCEORecruitment and Employment Confederation of the UK


HUMAN RESOURCE SERVICES | 2013 3M&A Overview & Analysis

The HR services M&A landscape has wit-nessed a steady increase in deal activity over the past three years. The following are the key highlights between 2010 and Q1 2013:

• Smaller deals have been common. Dur-ing 2010–Q1 2013, the median revenue of targets was $27.2mn, while the median transaction value was $4.1mn.

• Management buy-outs also caught inves-tors’ attention as both sponsored and non-sponsored buy-outs were executed.

• Most strategic deals represented geographic expansion or sector diversification.

• Companies with a clear sector focus, scale and geographic reach continue to be the most sought-after targets.

• The geographic deal spread saw a keen interest for European targets. At the same time, European buyers aggressively made the highest number of acquisitions, making this market the most active.

• The dominance of private companies as buyers was experienced globally, as against conventional large, publicly listed companies. In fact, some large public companies were acquired and eventually made private.

• Strategic buyers accounted for an 86.4% share of the overall deal activity, while financial buyers representing private eq-uity and other financial firms in the sector contributed the remaining 13.6% share.

Analysis by Deal Value and Volume

The attractive M&A environment in the HR services sector has caught the attention of

investors, with a large number of active buy-ers and sellers over the past three years. Since 2010, 299 buyers have announced 387 deals in the sector, including 34 trans-actions announced in the first three months of 2013.

Certain acquisitions demonstrated a fair degree of consolidation in the HR ser-vices sector — larger firms seeking to grow through acquisition of smaller niche firms. For instance, VIP Staffing Inc. acquired Em-ployer Flexible HR Inc. to double its pres-ence in Houston and broaden its niche in HR services for the oil & gas industry.

Management buy-outs were also prevalent among the announced deals between 2010 and the first three months of 2013. Both sponsored and non-sponsored buy-outs

were executed by the management to gain ownership and/or operational control over the company. These included buy-outs of Kavaliro Staffing Services in 2010, Genesis Associates (UK) Ltd. in 2011, Neuven Solu-tions Limited in 2012 and SF Group in 2012, to name a few.

During the first quarter of 2013, the HR services sector recorded 34 deals worth $0.9bn ($876.8mn), as shown in Figure 5. It was up from 26 deals worth $0.1bn ($109.2mn) in the first quarter of 2010, but below the same quarter 2012 performance, with deal volumes and values reaching an all-time high in the past three years. The median deal value3 increased from $0.8mn in the first quarter of 2010 to $76.4mn in the first quarter of 2013.

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Figure 5: Deals by volume and value, Q1 2010–Q1 2013

Source: Evalueserve Analysis

3 Represents deals with disclosed deal value



The median valuation multiple of total deals4 was around 0.35 times LTM revenue. Of the deals falling above the median multiple, some of them reported high profitability margins. Intelligence, Ltd., operating at a gross margin of 52.2%, was acquired by Temp Holdings for $723.2mn in 2013 (mul-tiple of 0.97 times LTM revenue).

Deal Analysis by Type of Targets

Between 2010 and Q1 2013, companies of-fering general staffing services have been the most sought-after acquisition targets within the HR services industry, accounting

for nearly 55.3% of all transactions. Pro-fessional/specialist staffing, which is the fastest growing HR services segment, ac-counted for nearly 31.7% of the overall M&A transactions during the period. Growing at a constant pace were also the activities in the executive search segment, with 18 deals taking place in 2012, up from 15 in 2010.

In the general staffing segment, the number of deals increased from 58 deals in 2010 to 72 in 2012. With 19 transactions, its share (55.8%) in Q1 2013 also remained strong. Traditional clerical and light industrial staff-ing, which this segment largely caters to, has been in decline owing to outsourcing and advancement in technology. To tackle this falling demand, firms in this segment are finding it appropriate to either restruc-ture or consider mergers and strategic acquisitions.

However, the professional/specialist segment that comprises high-skill, high-wage jobs of-fers significant opportunities. In this segment, M&A activity grew from 29 deals in 2010 to 46 deals in 2012. In Q1 2013, the segment witnessed 10 transactions, accounting for a 29.4% share of the deal activity. Apart from the inherent demand for professionals, this sector is benefiting from the recent increase in demand for temporary staffing. HR services buyers are looking forward to increasing their service mix through the addition of this differ-entiated, high margin business. With profes-sional/specialist staffing gaining traction, M&A activity is expected to remain strong in the fu-ture. In fact, the US Bureau of Labor Statistics projects a shortage of 1.2 million workers with bachelor’s degrees or higher by 2020. This implies the growing demand for professional/specialist staffing firms, making this segment increasingly lucrative for M&A activity in the near term.

Various Drivers

“Over recent years, the rise in deal ac-tivity in the HR services sector can be attributed to various factors. Service providers have been evolving from be-ing small, local companies to become more diversified, global businesses. At the same time, labor-market deregula-tion has promoted harmonized industry standards around the globe. Lastly, in the post-recession era, overall de-mand for a flexible workforce has also increased.”

Peter GrayBSS SpecialistM&A International Inc.United Kingdom

4 Represents deals with disclosed valuation multiples

Others Electricity T&D Electricity Generation2010

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14.7 28.4 56.9 56.913.9 33.0 53.0 53.0

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Executive search

Figure 6: Deal volume by type of HR services, 2010–Q1 2013




Further analysis of the transactions in this segment shows that recruitment companies catering to professional/specialist staffing within the financial services industry, com-prising banking, insurance and wealth man-agement services, have been the most via-ble targets. From the acquisition of only one HR services firm in 2010, seven such firms were acquired in 2011. Regionally, with five announced transactions, the UK topped the list for financial HR services firms in 2011. In Q1 2013, three such firms have already been acquired. Recently, healthcare HR services firms have also become attractive acquisition targets; eight such firms were acquired in 2012, from three in 2011.

The professional/specialist staffing seg-ment offers the strongest potential in the HR services M&A landscape. Among all three service segments, EBITDA multiples have been strongest in the professional/special-ist staffing segment. Between 2010 and Q1 2013, professional/specialist staffing firms received the highest median multiple of 9.1 times LTM EBITDA, compared with 8.4 times in the general staffing services seg-ment and 5.5 times in the executive search segment. Furthermore, the LTM EBITDA multiple has seen an increasing trend over the past three years, growing at an annual average rate of 30% over 2010–2012. This implies that there is continued strong inter-est from buyers in this segment.

Furthermore, the demand for companies offering HR services across varied sectors has also been consistent. At the same time, there has been a rising interest for HR ser-vices firms catering to the IT sector. From six deals to acquire IT serving HR services firms in 2011, accounting for nearly 5.2% of total deals, the number of such deals in-creased to 10 in 2012, representing nearly 7.4% of total deals in 2012.



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Figure 7: Comparison of deal multiples in service segments, 2010–Q1 2013

Figure 8: LTM EBITDA multiple for the professional/specialist staffing segment, 2010–2012

General staffing EV ($ million) LTM revenue LTM EBITDA

Mean 62.3 0.41x 9.68x

Median 10.9 0.34x 8.39x

Executive search EV ($ million) LTM revenue LTM EBITDA

Mean 28.3 0.67x 6.86x

Median 6.2 0.38x 5.50x

Professional/specialist staffing

EV ($ million) LTM revenue LTM EBITDA

Mean 79.0 0.41x 9.79x

Median 6.0 0.35x 9.14x

Note: Deals announced in Q1 2013 had no valuation multiples disclosed.



IT is perceived as one of the faster growing areas of the HR services industry. Accord-ing to SIA, during 1999–2011, the employ-ment rate in the IT sector in the US rose 30% compared with only an 0.8% increase in total employment. Owing to this growth, IT staffing grew 15% to $20.6bn in 2011 and 12% in 2012. It is expected to grow to $25bn (8%) in 2013.

The rising demand for IT professionals can be gauged by the acquisitions made by the big three HR services firms (Adecco, Rand-stad and Manpower). During the last couple of years, each of these firms has acquired a large US-based IT HR services firm, thus scaling up their exposure to the IT sector, particularly in the US.

The industrial, engineering and construc-tion (IEC) sector, which largely supports basic industries driving an economy, has been one of the most dominant sectors in the HR services M&A landscape. From only four transactions in this sector in 2011, 19 HR services firms catering to this sector were acquired in 2012, accounting for nearly 20% of total HR services M&A deals. As the world economies continue to recover, there is a strong reliance on basic industries such as manufacturing and con-struction to fuel this revival. This has been

the primary reason for an uptick in the IEC staffing sector in the recent past.

In the future, the contribution from both the IT and IEC sectors to the HR services industry, specifically temporary staffing, is expected to continue. According to SIA estimates, the share of IT and industrial staffing will increase to nearly 60% in the US temporary staffing market in 2018, from 53% in 2012.


36,2 9,6 8,5 20,2 10,6 6,4 8,5

9%

6%

11%

20%

9%10%

36%

DiversifiedFinanceHealthcareIndustrial, Engineering & ConstructionITServicesOthers

Figure 9: Deal volume by industry served by target, 2012

IT Influence

“The enormous boom in the use of com-puters has been the principal driver for increasing staffing demand for program-mers and technicians during the past decade. Also, with the US health system going fully electronic under The US Recovery Act of 2009, the demand for IT professionals with clinical experience has given a boost to IT staffing.”

Bradford A. AdamsBSS and Technology SpecialistM&A International Inc.United States

Note: Based on 94 deals for which target information was available.



Regional Deal Analysis by Value and Volume

By target’s origin, Europe dominated sector activity by attracting a major chunk of deals (about 56%) over the years, and reporting 216 transactions between 2010 and Q1 2013, as shown in Figure 10. The number of deals jumped from 56 in 2010 to 77 in 2012, representing a 37.5% rise. In addi-tion, Europe is also the largest regional HR services market, accounting for more than a one-third share in the global HR services market by 2012 revenues.

With the Eurozone unemployment rate hit-ting an all-time high in Q1 2013, deal activity relatively slowed in the region, recording 15 deals (44.1%) in Q1 2013.

The UK is the third largest market globally. It is among important geographies of interest for global buyers, representing 48.1% of Eu-ropean targets during 2010 and Q1 2013. The interest for UK-based targets soared 68.2% from 22 deals in 2010 to 37 deals in 2012.

The other prominent European HR services markets (France, Germany and the Neth-erlands) witnessed 49 deals, representing 22.7% of total European target deals during the past three years. This accounted for a combined value of $202.4mn in deal activity.

European targets reported a median deal value of $3.6mn, while North American tar-gets reported the highest median deal value of $46.1mn globally. At the same time, North America attracted the highest deal values, accounting for 44.2% of the global deal values between 2010 and Q1 2013, despite lesser deal volume (105). Its deal volume rose from 31 deals in 2010 to 38 deals in 2012, registering a 22.6% rise. Owing to im-proved M&A activity in North America, deal valuations also rose. The average valuation multiples increased from 0.28 times LTM revenue in 2011 to 0.39 times in 2012. The

acquisition of Apex Systems Inc. by On As-signment Inc. in 2012 had the highest valu-ation multiple of 0.97 times LTM revenue among deals with North American targets.

During the first three months of 2013, North American deal activity performed better, with 13 deals representing a 38.2% share in the overall global deals, beating the yearly average of 27.0% between 2010 and 2012. The improving deal activity is an indicator of an improving economy and a healthy op-erating environment for many HR services businesses.

At a country level, the US represents the single largest HR services market by 2012 revenues, with nearly a 32% share, al-though it is highly fragmented. The country accounted for 93.3% of the overall North American deal activity. According to the US Bureau of Labor Statistics, temporary place-ments in the region improved immediately following the recession. In addition, more growth in permanent placements and pro-fessional/specialist staffing is expected as the employment rate continues to improve in the region.


Figure 10: Regional deals by volume and value by target’s origin, 2010–Q1 2013

Note: Deal volume (2010–Q1 2013) = 387 deals; Deal value (2010–Q1 2013) = $6.1bn.

55,8 27,1 14 3,1

3%

14%

27%56%

EuropeNorth AmericaAsia PacificOthers

26,3 44,2 28,3 1,2

1%

28%

44%

26%


Deal volume

Deal value



The announced deal activity for Asia Pacific (APAC) targets was 54 deals, accounting for a 28.3% share in the global deal values, with a $2.2mn median deal value. Its deal activity was led by increasing buyer inter-est in Japan, which accounted for 48.1% of Asian target deals. Japan, which is the second largest HR services market globally by 2012 revenues (with a 17% share), at-tracted M&A interest from both Japanese buyers and also HR companies around the globe, especially from leading industry players. For instance, Adecco acquired VSN, Inc. in 2012 to double its exposure in Japan’s professional/specialist staffing mar-ket. Similarly, Randstad acquired FujiStaff in 2010 to increase its presence in Japan.

Of the remaining APAC targets, Australia at-tracted the second most interest, accounting for slightly over 20% of APAC target deals. Its deal landscape looks promising, backed by its booming mining sector (discussed in the key themes section).

By buyer’s origin, Europe dominated the sector activity and reported 196 (56.6%) transactions between 2010 and Q1 2013, as shown in Figure 11. These acquisitions were primarily local, with 185 (94.4%) of these acquisitions taking place within the European region.

HR services firms with a diversified sector strategy were the buyers’ favorite here. Of 196 deals, there were 44 deals (22.5% of total deals) during 2010 and Q1 2013, where firms offering varied services to different sec-tors were the acquisition target. This was followed by the IEC segment, which contrib-uted 10.7% (21 deals) to M&A activity.

Further, nearly 54.6% of the deals (i.e. 107 deals) by European buyers were targeted at firms providing general staffing services. The acquisition of firms offering professional/specialist and executive search services accounted for 31.6% (62 deals) and 13.8%

(27 deals), respectively, of the total acquisi-tion activity by European buyers. The trend clearly shows that in Europe, the consolida-tion of general staffing firms catering to blue collar workers and having clients in various sectors continues to be a regular activity.

North American buyers invested the most, accounting for 46.3% of the $6.0bn global disclosed deal values between 2010 and Q1 2013. This was driven by the growing preference for professional/specialist staff-ing firms among North American buyers. The number of such deals increased to

14 in 2012 from 9 in 2010. The acquisi-tion of Apex Systems by On Assignment for $693.7mn was the largest deal in 2012. Between 2010 and Q1 2013, the acquisition of professional/specialist staffing firms ac-counted for 32.7% of total deals, while the acquisition of general staffing services firms contributed 48.1% to total deals.

During the same period, APAC accounted for a 29.8% share of the global disclosed deal values with 38 deals. Buyers’ prefer-ence for general staffing services firms at nearly 63.2% grabbed the largest share.


Figure 11: Regional deals by volume and value by buyer’s origin, 2010–Q1 2013

Note: Deal volume (2010–Q1 2013) = 346 deals for which buyer information was

available; Deal value (2010–Q1 2013) = $6.0bn.

196 104 38 8

2%11%

30% 57%


1,4 2,8 1,8 0,1

1%

30%

46%

23%


Deal volume

Deal value



M&A Targets: Private vs. Public Companies

As M&A targets, private companies repre-sented the vast majority between 2010 and 2013 YTD, as shown in Figure 12. Their number ticked up from 89 deals in 2010 to 118 deals in 2012. In fact, the deal vol-ume also remained strong in the first three months of 2013, with an 82.4% share in the overall deal volume.

Note that public targets represented only 6% of the deal activity during the past three years, but accounted for a 24% share in total deal values. More than half of such public targets were eventually made pri-vate. Private equity groups were quite ac-tive in acquiring public targets, as shown from the selection of transactions in the table above.

M&A Deal Makers

Since late 2010, against a backdrop of stabilizing economies worldwide, there has been a gradual and cautious return of buy-ers in the HR services M&A market. These buyers are mostly companies that have fairly weathered the recessionary cycle and entered the M&A market steered by their experienced, confident management teams and strong cash balances. They have fo-cused on acquiring the targets which align with their long-term strategic growth plan,

be it the addition of a new geography, ser-vice line, customer or management talent.

After the low point for HR services M&A in 2009, several major HR services deals were announced during late 2010 and 2011. Leading HR services providers such as Ad-ecco, Randstad and Manpower were highly active during 2010–2011, but were relatively less active in 2012, as they were digesting their recent acquisitions. However, the M&A pace continued its momentum with more M&A transactions being announced in 2012


338 23 26

7%6%

87%

Private companyPublic companyOthers

Figure 12: Deal volume by target company type, 2010–Q1 2013

Note: Others include assets/product deals.

Competitive Pressure

“A spurt in M&A activity for private targets has been observed, as com-panies look to acquire or merge with other companies to grow their busi-ness or stay competitive. This has helped them tackle competitive pres-sures, advancements in technology and difficult economic conditions.”

Maarten WolleswinkelBSS SpecialistM&A International Inc.The Netherlands

Table 2: Selection of transactions

Date announced

Buyer TargetDeal value

($mn)

Oct-12Gilde Buy Out Partners

(The Netherlands)TMC Group N.V.

(The Netherlands)90.3

May-12 Management Buy-OutMorson Group plc

(UK)76.2

Feb-12LDC Ltd.

(UK)

Network Group Holdings Plc

(UK)38.8

Aug-10

SBI CAPITAL Co., Ltd. (Japan);

Ant Global Partners (Singapore)

VSN, Inc. (Japan)

41.8




than any time in the past five years. This time around it was not large publicly traded companies but private equity-backed buy-ers driving the market acquisition activity. The share of private acquirors increased from 77.5% of total deals in 2010 to 80.8% in 2012. During 2010–Q1 2013, their share in total M&A activity was 80.9%. During the period, many of the otherwise highly acquisitive public HR services buyers such as Staffmark and SFN Group were acquired and taken private.

Deals executed in the past three years by leading players in the industry (as listed be-low) showcase an active 2010–2011 period, followed by a cooling-off in the past year. This was primarily because the leading industry players were digesting their 2010–2011 acquisitions. With this, 2013–2014 could be a comeback year for these firms.


Others Electricity T&D20102012

77.5 22.580.8 19.2

0%

20%

40%

60%

80%

100%

2010 2012

19.2%22.5%

80.8%77.5%

Private company

Public company

Figure 13: Deal volume comparison by buyer company type, 2010–2012

Note: Based on 346 deals for which buyer information was available.


Date announced

Buyer TargetDeal value

($mn)

Jan-10 RandstadCorridor AS

(Norway)N/A

Aug-10 RandstadFujiStaff Holdings Inc.

(Japan)228.4

Sep-10 ManpowerGroupStealth Consulting SAS

(France)N/A

Oct-10 RandstadProfiPower Kft

(Hungary)N/A

Mar-11 Adecco

Trainico Training und Ausbildung Cooperation in Berlin Brandenburg GmbH

(Germany)

N/A

Mar-11 ManpowerGroupXi'an Foreign Enterprise

Service Co. Ltd. (China)

N/A

May-11 AdeccoMedic-Zeitarbeit GmbH

(Germany)N/A

Jun-11 ManpowerGroupREACH HR

(China)N/A

Jul-11 RandstadSFN Group, Inc.

(US)742.9

Jan-12 AdeccoVSN, Inc. (Japan)

N/A

Feb-13 ManpowerGroupWorkshop Bemanning &

Kompetanse AS (Norway)

N/A




Most Active Buyers by Industry Type

Strategic buyers, largely comprising HR services firms, represented the largest share of transactions by volume (86.4%) as well as deal value (65.2%), as shown in Figure 14. They invested in deals with a median valuation multiple of 0.35 times LTM revenue. Financial buyers, comprising private equity groups (PEGs), banks, etc., invested in lesser deal volume (13.6%), but shelled out higher deal values (34.8% of to-tal disclosed deal value) between 2010 and Q1 2013. Their deals had the median valu-ation multiple of 0.50 times LTM revenue.

The capital raised by private equity firms from 2002 to 2008 was largely under-invested, leaving these firms with more than $500bn of non-invested capital post-recession. The pressure to invest this

corpus coincided with the comeback of well-performing HR services companies post-recession, which made for attractive acquisition targets. The desire to invest funds received further impetus by the good valuation deals that PEG players have real-ized over the past few years.

What Are Buyers Buying?

At present, buyers in the M&A HR services market have varied interests in terms of size, location or sector served by target companies. However, buying activities have shown the following key trends:

• Preference for professional/specialist HR HR services:

Firms specializing in professional/special-ist staffing have been the most sought-after acquisition targets, largely because of higher margins and the longer-term na-ture of their business. Companies in this sector have recorded the fastest recovery since the 2008 recession.

This is clearly evident from the multiples at which these companies were bought. During 2010–Q1 2013, firms provid-ing professional/specialist staffing were bought at an average multiple of 9.8 times LTM EBITDA, while those providing

general staffing earned a multiple of 9.6 times.

• Strategic demand for diversified staffing:

Although the HR services firms serving specific sectors/industries have been popular among strategic buyers seeking platform acquisitions, the firms with a diversified sector strategy also witnessed persistent buyers’ interest. These buyers, however, have been selective and the ac-quisitions have largely been driven by the objective to establish similar operations in specifically targeted countries.

• New wave of interest from services/solu-tions companies and outsourcing firms:

Buyer interest is also emerging inter-nationally from outside the HR services industry. This indicates an important development in M&A activity within the industry, which has mostly seen industry players or private equity companies as buyer groups. This inclination is driven by the scarcity of HR in buyers sectors, which are mostly in the IT, healthcare and financial services sectors. The acquisi-tion by German IT staffing and software firm Allgeier of Turkey-based Oxygen Consultancy is a noteworthy transaction, confirming this trend.


86,4 13,6

14%

86%

Strategic buyerFinancial buyer

Figure 14: Deal volume by buyer type, 2010–Q1 2013

Note: Based on 346 deals for which buyer information was available.

PEGs Active

“For several years, PEGs have been in-vesting quite actively in the HR services industry for add-on acquisitions as well as platform investments. Their induce-ment towards this sector was, among others, driven by the obligation to invest their idle funds.”

Jan P. HatjeBSS SpecialistM&A International Inc.Germany


HUMAN RESOURCE SERVICES | 2013 4Forward Looking Themes

The Mining Boom, a Bane for the Australian HR Services Industry

Amid such a scenario, an HR services company looking to grow offshore would consider a stake in the Australian market, especially if the mining boom continues. This overseas interest towards Australia will add to the Australian workforce needs, and also lead to M&A opportunities within the HR services sector. Australia accounts for 5% of the global HR services annual sales by 2011 revenue.

Private Equity Groups (PEGs) Are Here to Stay

During 2009–2010, PEGs had a strong in-vestment appetite with surplus cash of more than $500bn in uninvested capital after the recession, according to SIA. At this time, platform acquisitions within HR services looked appealing to such PEGs, who were looking to make sizable investments across sectors. Over 2010–Q1 2013, many PEGs exited their investments profitably and reaped double the value.

Selected examples of such exits are shown in the table above.

The preferred PEGs’ investment cycle for at least doubling the investments in the HR services sector is usually three to five years, based on market conditions. PEGs will continue to reap their 2009–2010 in-vestments over the next couple of years, and thus can be the driving force for prom-ising M&A activity in the near term. Along-side this, with significant committed capital to invest (last estimated to be approximate-ly $430bn by SIA), further investments by

PEGs in the sector are anticipated. Such investors will continue to put their money in growth companies possessing strong management.

Middle Market Seeking Attention

Owing to the uncertain global economic environment, companies’ organic growth has relatively slowed. This has increased their confidence in the inorganic mode of growth — via middle-market acquisitions. Instead of investing a large sum on a single large acquisition, buyers find it safer to in-vest in middle-market companies. Over the 2010–Q1 2013 period, this trend can be observed given that only a handful of large deals were announced. According to Cap-stone Research, middle-market firms in the industry are proving to be attractive acquisi-tion targets, offering geographic coverage, differentiated services, blue chip customers and talented management teams that can be immediately accretive to the acquiring organization.

Rising Demand

“Australia is one of the leading exporters of coal, iron ore and gas. The unprec-edented demand for these resources is driving the boom in Australia’s mining sector. With this, the demand for person-nel is also getting stronger by the day across every part of the mining sector, from blue collar to senior management.”

Paul YoungBSS SpecialistM&A International Inc.Australia


PEGs TargetInvestment

value (period)Exit value (period)

ROI

Kohlberg Kravis

RobertsIntelligence, Ltd.

$358.1mn

(Jun-10)

$723.2mn

(Mar-13)2.0x

Cereberus Capital

Advantage Resourcing (American & European

Unit)

$196.0mn

(Apr-08)

$410.0mn (Jan-12)

2.1x

RJD Partners

Teaching Personnel Ltd.

$48.8mn

(Jul-07)

$70.4mn

(Jul-10)1.4x

Source: Evalueserve AnalysisNote: Average exchange rate of £/$: 2.0328 (Jul-07) and $ 1.564 (Jul-10).

Average exchange rate of ¥/$: 0.0098 (Apr-08).

ROI stands for Return on Investment.



Regulations Framing HR Services Demand Story

In the coming years, a few reforms are deemed to spur demand for temporary staff-ing. They are expected to have a material impact on gross margins of HR services companies (the level of impact is currently uncertain), which will bend the focus to-wards temporary staffing in the near future. The following are a few examples:

• In Germany, the Collective Labor Agree-ment (CLA) was announced in November 2012, where HR services agencies have to pay their employees higher wages in return for greater flexibility in the work-force. Equal pay in several sectors of the market, including the metal and chemical sectors, was also implemented.

• In France, tax credit for low wage employ-ers was announced in January 2013.

• In the US, the US Affordable Care Act, ef-fective January 2014, requires employers to offer affordable healthcare to full-time employees. The Act is likely to have a ma-terial impact on labor costs and will turn the focus towards temporary staffing. It is also expected to increase the workforce requirements in the healthcare sector.

HR Services Companies Continue Going the Outsourcing Way

The global outsourcing market for HR ser-vices (HRO) generates revenue of more than $500bn annually, and is projected to grow 5% (on average) through 2015, ac-cording to IBISWorld. The growth in the HRO sector is driven by the need to bet-ter manage labor-intensive HR activities. Therefore, companies are increasingly

looking for external solutions to reduce costs and improve productivity.

To meet the rising demand for broader and more sophisticated HR services, HRO firms will require capital, resources and technolo-gy. In such a scenario, either they will make acquisitions to build scale and capabilities or serve as viable acquisition targets for larger, diversified companies.

The following segments of the HRO sector have attracted investors’ interest over the recent years and are expected to witness further consolidation:

• Managed Services Providers (MSP): manage relationships with labor suppliers on behalf of customers

• Vendor Management Systems (VMS): web-based applications that are used to manage and procure workforce frequent-ly, in conjunction with MSP programs

• Recruitment Process Outsourcing (RPO): partial or full outsourcing of the internal recruitment function to a third-party spe-cialist provider, which assumes the role of the client’s recruiting department by own-ing its recruitment process

• Professional Employer Organizations (PEO): offer comprehensive HR outsourc-ing for small and mid-size companies

These segments have attracted many HR services firms to enter the HRO seg-ment through acquisitions in recent years. Randstad’s acquisition of SFN Group in 2011 added SFN’s SourceRight division, a well-established RPO and MSP business, giving Randstad a strong foothold in the outsourcing space. In 2012, ADP acquired The RightThing, a leading RPO provider, to add the RPO business to its portfolio and serve its mid-market clients.

Strong M&A Outlook

“Such activities make the overall M&A outlook strong as HRO is expected to continue playing an integral role in shap-ing the HR services landscape.”

Erik VerkestBSS SpecialistM&A International Inc.Belgium



Internationalization of Asian HR Services Firms

Asia holds an important position in the glob-al HR services market. Japan, the largest HR services market in the region, accounts for the second-largest market share globally (in 2012). The Japanese market is highly competitive, as several important interna-tional companies have already entered into this market. Acquisition is the default choice for late entrants who find it tough to pen-etrate this market through green-field entry, leading to increased M&A activity.

In Asia’s outbound M&A landscape, play-ers have lately begun to witness a phase of internalization. Japanese HR services firms were the most active buyers and have made certain important acquisitions in the US and Europe in the last few years. These acqui-sitions were a part of their strategy either to enter foreign markets or to expand their presence there.

A series of acquisitions by one of Japan’s leading HR services firm, Recruit Holdings, during 2010–2012, exemplifies this strategy to become a global HR services player. The company spent around $700mn on M&A in the US and Europe to establish and strengthen its operations in these regions. The company’s important acquisitions in re-cent years include The CSI Companies (to enter the US market) in 2010, Staffmark Inc. (to expand its presence in the US market) in 2011, and Advantage Resourcing Interna-tional (to increase its presence into Europe, Australia, the US and the Middle East) in 2012. The company plans more acquisi-tions, particularly in the US, to strengthen its presence in this market.

The Japan-based Pasona Group and Temp Holdings may look to increase their foothold in the US market. North America already contributes 40 to 45% to Pasona’s revenue. During 2011–2012, the group expanded its branches in the US. The acquisition of a US HR services firm could therefore be in the pipeline to strengthen its operations in this region. Temp Holdings already has around

a 5% stake in US-based HR services firm Kelly Services, so a possible target in the US should complement Kelly’s operation.

Moreover, these Asian traditional HR services firms would be looking to expand in the US professional/specialist staffing operations in sectors such as IT and healthcare, some of the most lucrative segments in the HR ser-vices business globally. Such Asian buyers are likely to view US-based healthcare staff-ing firms, in particular, as attractive acquisi-tion targets.


Markets of geographic focus up to 2010Expected growth in presence in near term

Figure 15: Global presence of Asian players

Expanding Markets

“In the future, it is expected that sev-eral Asian staffing firms might follow suit, reducing their dependence on domestic markets and expanding into established staffing markets such as Europe and the US.”

Alistair BurgoyneBSS SpecialistM&A International Inc.Singapore


HUMAN RESOURCE SERVICES | 2013 5Conclusion

Globally, organizations are increasingly investing more to better manage their work-force by turning to HR services providers, either to develop their own HR function or to outsource it. The global HR services market grew at a CAGR of 3.4% during 2010–2012 and is expected to grow further, as optimistic economic conditions will lead to additional employment opportunities and the increasing workable population will add to the workforce.

Furthermore, the liberalization of labor laws in developed nations has driven the industry’s growth for many years. However, emerging markets are following suit in the liberalization of labor laws and are inviting large players for investment. International leading firms such as Adecco, Randstad, ADP and Manpower have already started making huge investments in these markets.

These players’ investment decisions are also driven by the immense untapped growth potential shown by the HR services sector in emerging markets such as India (a $5.1bn market) and China (a $2.6bn market). The temporary staffing penetration rates in these markets are still at low levels. In emerging markets, the ongoing dynamic economic activity and rising investments by international companies are augmenting their HR services business.

Furthermore, the following catalysts con-tinue to drive HR services firms toward M&A over organic growth:

• The need for expansion into multiple loca-tions and geographic markets

– In the future, even mid-size firms will move toward establishing a global footprint.

• The need for service diversification or um-brella service offerings, such as specialist staffing, recruitment process outsourcing and workforce management solutions

• The growing need for temporary staffing

– The recent economic downturn proved the importance of flexible staffing. Com-panies operating in an uncertain post-re-cession environment now favor a flexible workforce.

• The need for professional/specialist staff-ing (one of the high-margin businesses in the HR services industry)

– In mature markets, the mismatch be-tween educated individuals and labor market needs, as well as the aging popu-lation, will continue to increase the short-age of a skilled workforce.

– Given an increasingly mobile work-force, preference for on-demand, special-ized professionals will continue to grow.

– Foreseeing such trends, companies such as Adecco have invested in the professional/specialist staffing business in tough economic times and continue to invest now while economies are re-covering. These companies are well positioned to take advantage of the eco-nomic upswing.

Additionally, increasing use of social media for recruitment will play an important role in shaping the industry. Owing to rapid shifts in the dynamic marketplace, the ability to use social media is required to connect rapidly across various stakeholders in the HR ser-vices process.

Finally, from an investor’s point of view, the sector is well set to witness a series of M&A activity in the coming years, with the re-emergence of HR services firms as buyers from 2013 onwards.

• These include leading HR services firms that have completed the integration of their purchases over the past two years.

• They are expected to be picky and will look for differentiated assets.

The rising interest of private equity players also looks set to create an engaging M&A market.

• In the short term, a series of exits will be triggered as the investment cycle comes to an end.

• Simultaneously, fresh investments are also expected owing to surplus non-invested cash.

Upbeat Outlook

“With strong fundamentals and the re-silient nature of the HR services sector, the outlook for the sector is upbeat. An uptick in M&A volume, in line with better deal valuations, is certainly expected.”

Jonas P. KnudsenHead of M&A International Inc.’sBSS Group



About M&A International Inc. 6

Jonas P. Knudsen

Head of M&A International Inc.’s Business Support Services (BSS) [email protected]

M&A International Inc.’s members actively represent buyers and sellers in the BSS industry as well as those seeking to raise private equity and debt capital. We possess significant BSS sector expertise, industry relationships and experience in successfully executing complex transactions on behalf of our clients.

www.mergers.net


7Main M&A International Inc.

BSS Specialists

Country Contact Email

AmericasBrazil (São Paulo) Gianni Casanova [email protected] (Montreal) Jean Charles Phaneuf [email protected] (Toronto) Derek van der Plaat [email protected] (Santiago) Arnoldo Brethauer [email protected] States (Atlanta) Alexander C. Mammen [email protected] States (Boston) Bradford A. Adams [email protected] States (Chicago) Arthur J. Lyman [email protected] States (Cleveland) Ralph M. Della Ratta, Jr. [email protected] States (Dallas) Bradley Buttermore [email protected] States (Jacksonville) C. Donald Wiggins [email protected] States (New York) Michael S. Goldman [email protected] States (Seattle) Thomas Elzey [email protected]

EuropeBelgium (Brussels) Erik Verkest [email protected] (Sofia) Rossen Ivanov [email protected] Republic (Prague) Peter Turner [email protected] (Copenhagen) Jonas P. Knudsen [email protected] (Tallinn) Heikki Källu [email protected] (Helsinki) Mikael Planting [email protected] (Paris) Eric Felix-Faure [email protected] (Hamburg) Jan P. Hatje [email protected] (Dublin) Raymond Donegan [email protected] (Milan) Dario Di Iorio [email protected] (Vilnius) Šarūnas Skyrius [email protected] (Amsterdam) Maarten Wolleswinkel [email protected] (Oslo) Dan Petterøe [email protected] (Warsaw) Bill Fawkner-Corbett [email protected] (Ljubljana) Jure Jelerčič [email protected] (Madrid) Enrique Villalba Nogales [email protected] (Stockholm) Johan Wiström [email protected] (Berne) Peter M. Binder [email protected] Kingdom (London) Brian Livingston [email protected] Kingdom (London) Peter Gray [email protected]

Africa / Asia Pacific / Middle EastAustralia (Sydney) Paul Young [email protected] (Beijing) Dana Schuppert [email protected] (Hong Kong) Adrian Bradbury [email protected] (Mumbai) Sameer Karulkar [email protected] (Tel Aviv) Tomer Segev [email protected] (Tokyo) Takashi Yune [email protected] (Singapore) Alistair Burgoyne [email protected] Africa (Johannesburg) Yaron Zimbler [email protected]




Representative Transactions 8Transactions Closed by Members of M&A International Inc.

Other Commercial and Professional Services

Advisor to seller

France

has been acquired by

Consulting ServicesAdvisor to seller

Netherlands/Bulgaria/Austria

sold its 70% stake in Consulteam to


Russia/France




Advisor to seller

United Kingdom



Advisor to seller

Netherlands

Hoge Boom Amersfoort B.V.

has acquired


Advisor to buyer

Belgium

IT ServicesAdvisor to seller

United States


The IT staffing business of


Netherlands

has been acquired by has acquired


Advisor to buyer

Australia


8Representative Transactions

Major M&A Transactions Mentioned in this Report

Date Announced

Target Acquiror Deal Synopsis Value ($mn)

EV/EBITDA

March2013

Intelligence, Ltd.(Japan)

Temp Holdings Co., Ltd. (TSE:2181) (Japan)

Intelligence, Ltd. is a Japan-based human resources company providing services such as recruitment consulting services, clerical staffing services and professional services. Temp Holdings Co., Ltd. bought Intelligence Holdings Ltd. from private equity firm Kohlberg Kravis Roberts & Co. L.P. in order to scale its operations in advertising and recruiting businesses in Japan and Asia. The combined company is expected to have revenues of more than $3.37 billion, EBITDA of over $220 million and employ more than 10,000 people.

723.2 N/A

March2013

Employer Flexible HR, Inc. (US)

VIP Staffing, Inc.(US)

Employer Flexible HR, Inc. provides human resource outsourcing, professional search, and recruiting and staffing services. Employer Flexible’s staffing division has a great reputation in the (Houston) oil and gas market. The deal will expand VIP Staffing’s size in the Houston market and broaden the company’s niche in employment staffing for the oil and gas industry.

N/A N/A

February2013

Workshop Bemanning & Kompetanse AS (Norway)

Manpower A/S (Norway)

Workshop Bemanning & Kompetanse AS provides staffing services and is Norway's largest recruitment specialist in the construction sector. The acquisition strengthens Manpower's position in the Norwegian staffing market.

N/A N/A

December2012

Genesis Associates (UK) Ltd. (UK)

N/A Genesis Associates (UK) Ltd. provides interim, contract and permanent recruitment solutions for privately owned and blue chip organizations worldwide. The company primarily focuses on recruiting staff for sales, information technology and finance operations. The transaction was a management buy-out in which Patrick Bell, Managing Director of Genesis Associates (UK) Ltd., acquired Genesis Associates (UK) Ltd., from Darren Cornwall and Ian Blackhurst.

N/A N/A

November2012

Neuven Solutions Limited (UK)

N/A Neuven Solutions Limited offers temporary and locum staffing solutions. The deal was a management buy-out wherein John Simmonds, a part of the management team at Neuven Solutions, acquired Neuven Solutions Limited.

N/A N/A



Date Announced


EV/EBITDA

November2012

SF Group(UK)

Hamilton Bradshaw(UK)

Select Financial Ltd., offers recruitment consulting and executive placement services. In a management buy-out, Hamilton Bradshaw, along with management led by Tony Minnis, acquired SF Group.

N/A N/A

October2012

Select Appointments Limited(UK)

Staffline Group (UK)

Select Appointments Limited is a UK staffing company and recruitment franchisor. It offers services for permanent and temporary jobs in the areas of administration and secretarial, call centre, accountancy and finance, sales and marketing, legal, medical support and specialist. The deal will broaden Staffline's operational reach and help establish franchise networks as Staffline seeks to expand its services into the white collar staffing market.

N/A N/A

October2012

TMC Group N.V.(The Netherlands)

Gilde Buy Out Partners(The Netherlands)

TMC Group N.V. primarily engages in the deployment of employees in the areas of technology, ICT and construction in the Netherlands and internationally. It provides technical specialists for the development of products and projects. The acquisition will enable Gilde Buy Out Partners to benefit from the growth potential of TMC Group in its home market of the Netherlands as well as surrounding countries.

90.3 7.7

October2012

Oxygen Consultancy(Turkey)

Allgeier SE (XTRA:AEI)(Germany)

Oxygen Consultancy is a consultancy company providing human resources solutions to blue chip multinationals, new investors, and local conglomerates and businesses in Turkey. The company offers recruitment solutions specializing in the areas of industries, functions, managerial level, and recruitment strategy. It primarily provides candidates for office managers, executive assistants, department assistants, and administrative staff. The deal enables Allgeier SE to expand its products and services in the growth market of IT and commercial personnel services, and further strengthen its presence in the Turkish market.

3.4 N/A

8Representative TransactionsHUMAN RESOURCE SERVICES | 2013


Date Announced


EV/EBITDA

May2012

Talent2 International Ltd.(Australia)

Allegis Group, Inc. (US); Morgan and Banks Investments Pty Ltd. (Australia)

Talent2 International Limited provides human resource advisory, payroll, recruitment and learning services. The acquisition of Talent2 International was through a scheme implementation deed between Morgan & Banks Investments Pty Limited and Allegis Group, Inc. to acquire a 78.22% stake in Talent2 International Ltd. for $117.8 million. Morgan & Banks and Allegis Group acquired 115 million shares at $0.68 per share. The shareholders of Talent2 also received dividends of $0.09 per share. The acquisition enabled Allegis Group to extend its footprint into Asia Pacific markets as well as benefit from Talent2’s expertise in recruiting, learning, development, payroll and RPO.

117.8 9.8

May2012

Morson Group PLC (UK)

N/A Morson Group PLC engages in the provision of specialist engineering and technical personnel in the United Kingdom. In a management buy-out transaction, the management team of Morson Group PLC, comprising of Gerrard Godfrey Mason, Gerard Anthony Mason, Paul John Gilmour and Kevin Patrick Gorton, offered to acquire the remaining 53.22% stake in Morson Group PLC from Sitec Group Limited, Schroder Investment Management Limited and other shareholders for $18.9 million. The buyers offered $0.78 for each share of Morson.

76.2 6.3

March2012

Apex Systems, Inc.(US)

On Assignment, Inc. (NYSE:ASGN)(US)

Apex Systems, Inc. engages in recruiting and placing information technology professionals for contract, contract-to-hire and other staffing services in the United States. The aggregate consideration was a combination of cash and shares of common stock in exchange for the shares of Apex common stock. The aggregate consideration was $217 million of common stock and $383 million in cash, subject to adjustment in certain circumstances. The acquisition positions On Assignment to provide a broader spectrum of IT staffing offerings, from mission critical daily IT services to high-end specialty projects.

693.7 14.3



Date Announced


EV/EBITDA

February2012

Network Group Holdings Plc (UK)

LDC Ltd.(UK)

Network Group Holdings Plc engages in the provision of staffing and outsourced services in the United Kingdom. The transaction is a management buy-out which consolidates Pertemps and Network Group (PNG) into a unified business, allowing for more effective delivery of its combined capability. It facilitates the Group’s planned growth and acquisition strategy. The transaction was also a continuation of the transfer of ownership of the business from Tim Watts to PNG’s employees who will hold around 40% of the Group’s equity going forward. Tim Watts and the founders of both Pertemps and Network will continue to hold a substantial equity investment in PNG.

38.8 8.5

January2012

Advantage Resourcing America, Inc. (US) and Advantage Resourcing Europe B.V. (the Netherlands)

Recruit Holdings Co., Ltd.(Japan)

Advantage Resourcing America, Inc. and its European unit is a privately held global staffing firm with nearly 240 offices in the US and 22 offices spread across Europe, in addition to offices in Australia, Hong Kong, Singapore and Dubai. It had annual global revenues of $1.4 million during the financlal year 2011. It manages 30,000 temporary staff worldwide, and directly employs over 2,000 people. The entity was first acquired by private equity firm Cerberus Capital Management LP in 2008 for around $194 million. In January 2012, Recruit Co. Ltd. acquired the stake from Cerberus for about $410 million. With the deal, Recruit expanded its global services spanning five continents including North America, South America, Europe, Asia and Australia.

410.0 N/A

January2012

VSN, Inc.(Japan)

Adecco S.A. (SWX:ADEN)(Switzerland)

VSN, Inc. provides human resource services in Japan. It offers engineer dispatching services to the information technology, mechatronics and electronics, and biochemistry sectors as well as provides contract and paid placement services. The company also offers human resource dispatching services to various production companies. Adecco S.A. acquired VSN, Inc. from SBI Value Up Fund No.1 LP, managed by SBI CAPITAL Co., Ltd., Ant Global Partners and other shareholders at an enterprise value of $116 million. In the financial year 2010, VSN generated turnover of $208 million. The acquisition expanded Adecco's exposure to professional staffing in Japan and reinforced its strong position in Japan's attractive growth market.

N/A N/A



Date Announced


EV/EBITDA

October2011

Staffmark Holdings, Inc.(US)

Recruit Holdings Co., Ltd.(Japan)

Staffmark Holdings, Inc. provides various staffing services to small and middle-market companies, local firms and large corporations in the United States. It offers light industrial, clerical and specialty staffing services. Through the acquisition of Staffmark, Recruit increased its exposure to the US staffing market.

295.0 8.2

July2011

SFN Group, Inc.(US)

Randstad North America, L.P.(US)

SFN Group, Inc. operates as a strategic workforce solutions provider in the United States and Canada. It offers professional and staffing services, which include temporary staffing, outsourcing and permanent placement services. The acquisition is a unique strategic fit, enhancing Manpower's service offerings and geographic coverage, making it the third-largest HR services provider in North America through doubling its presence in the US and reinforcing its leading position in Canada.

742.9 10.3

June2011

REACH HR(China)

ManpowerGroup Inc.(US)

REACH HR operates as a human resource company which engages in temporary employee placement services. It caters to the electrical appliance and logistics industries. The deal further expanded ManpowerGroup’s presence across China's new and traditional manufacturing hubs.

N/A N/A

May2011

Medic-Zeitarbeit GmbH (Germany)

Adecco Personal- dienstleistungen Gmbh(Germany)

Medic-Zeitarbeit GmbH engages in the procurement and hiring of nursing personnel and medical professionals. The company offers comprehensive training and continuing education in the medical and health field, such as specialized training in anesthesia care and surgical services. The acquisition of the medical specialist agency is a step for Adecco to expand its HR services in the medical & science business.

N/A N/A

March2011

Right4staff Holdings Limited (UK)

Gi Group S.p.A.(Italy)

Right4staff Holdings Limited provides recruitment, staffing and workforce management services to local and national clients. The deal enables Gi Group to expand services beyond industrial and blue collar sectors, develop search & selection activities, and make its entry into the UK staffing market.

N/A N/A

March2011

Xi’an Foreign Enterprise Service Co. Ltd. (China)

ManpowerGroup Inc.(US)

Xi'an Foreign Enterprise Service Co. Ltd. provides staffing and other human resource services. By acquiring Xi'an Fesco, ManpowerGroup increased its foothold in China's manufacturing staffing market.

N/A N/A



Date Announced


EV/EBITDA

March2011

Trainico Training und Ausbildung Cooperation in Berlin Brandenburg GmbH (Germany)

Adecco Personal- dienstleistungen Gmbh(Germany)

Trainico Training und Ausbildung Cooperation in Berlin Brandenburg GmbH operates as a technical training and staffing agency. The deal was through the acquisition of a 70% stake in Trainico Training Und Ausbildung Cooperation In Berlin Brandenburg Gmbh from Lufthansa Technical Training Gmbh.

N/A N/A

October2010

ProfiPower Kft(Hungary)

Randstad Hungary Kft(Hungary)

ProfiPower Kft provides permanent and temporary recruitment services for employers in Hungary and internationally. The company provides human resources consulting services, including group, individual and executive outplacement as well as career transition, recruitment, coaching and career counseling services. The deal repositioned Randstad's position as a market leader in Hungary, with a broad service portfolio ranging from staffing, search and selection, HR solutions and executive search.

N/A N/A

September2010

Stealth Consulting SAS (France)

Manpower Professional France S.A.S.(France)

Stealth Consulting SAS provides recruitment services in Paris. The acquisition is a part of Manpower's ambition to become a leading player in direct approach-based head hunting for middle and top management and to expand its position in the distribution, IT and telecom sectors as well as to create a new division for head hunting in the public sector.

N/A N/A

August2010

VSN, Inc. (Japan)

SBI CAPITAL Co., Ltd.(Japan);Ant Global Partners (Singapore)

VSN, Inc. provides human resource services in Japan. In a management buy-out for $41.8 million, SBI Value Up Fund No.1 LP of SBI CAPITAL Co., Ltd. and Ant Global Partners made an offer to acquire the remaining 59.17% stake in VSN, Inc. from Japan Asia Investment Co. Ltd., JAFCO Co., Ltd., Daiwa Corporate Investment Co., Ltd., Ikegin Capital Co., Ltd., ACA Inc., Ant Capital Partners Co., Ltd. and other shareholders. Under the transaction, the buyers offered to acquire 2.96 million shares of VSN for $9.97 per share and 0.09 million share purchase securities comprising of 2005 and 2006 share purchase warrants.

41.8 N/M



Date Announced


EV/EBITDA

August2010

FujiStaff Holdings Inc.(Japan)

Randstad Holding NV (ENXTAM: RAND)(The Netherlands)

FujiStaff Holdings Inc., through its subsidiaries, provides temporary and permanent staffing and business contract services in Japan. Randstad Holding acquired the 79.5% stake in FujiStaff Holdings Inc. for $228.4 million from family and other shareholders. Randstad already held a 20.5% stake in FujiStaff. The deal expands Randstad Holding’s presence in the Japanese staffing market, one of the fastest growing worldwide.

228.4 7.5

July2010

Teaching Personnel Ltd.(UK)

Graphite Capital Management LLP(UK)

Teaching Personnel Ltd. operates as a teacher recruitment agency in the United Kingdom. The company engages in the recruitment, selection and vetting of supply staff for schools. It provides long-term supply works, day-to-day supply works and permanent placements for various positions, including teachers, teaching assistants and nursery nurses. Graphite Capital Management LLP through Graphite Capital Partners VII and the management team of Teaching Personnel Ltd. led by John Bowman acquired Teaching Personnel Ltd. from RJD Partners Limited for $69.4 million on 25 July 2010.

69.4 N/A

July2010

Kavaliro Staffing Services(US)

N/A Kavaliro Staffing Services offers staffing services in information technology in the US. The company also provides engineering staffing services, finance and accounting staffing services as well as administrative and professional staffing services. The acquisition was a management buy-out with Bill Peppler, Mark Moore, John Mahony and Diane Symes-Mahony acquiring the Orlando and Charlotte offices of Kavaliro Staffing Services from SkillStorm Commercial Services LLC.

N/A N/A

July2010

The CSI Companies, Inc. (US)

Mitsui & Co. Ltd. (TSE:8031); Recruit Holdings Co., Ltd. (Japan)

The CSI Companies, Inc. provides employment consulting solutions like executive retained search services for executive posts, administrative staffing services, etc. to companies in various sectors in the US and internationally. The acquisition helped Recruit Holdings to make its entry into the US HR services market.

N/A N/A



Date Announced


EV/EBITDA

June2010

Intelligence, Ltd.(Japan)

Kohlberg Kravis Roberts(US)

Intelligence, Ltd. is a Japan-based human resources company providing services such as recruitment consulting, clerical staffing and professional services. The deal was a strategic investment by Kohlberg Kravis Roberts to benefit its stakeholders from the profitable investment in Intelligence, Ltd. Intelligence, Ltd. is one of the few recruitment services firms in Japan providing a comprehensive HR services offering and showed promising growth amidst expected growth in the Japanese staffing market.

358.1 N/A

February2010

Tatum, LLC (US)

SFN Group, Inc. (US)

Tatum, LLC provides executive search and consulting services in the United States. Tatum is well known for its expertise in CFO hiring and would complement SFN's existing professional services business. The acquisition will also expand SFN's presence in the C-level interim and consulting market and help achieve cost synergies through the reduction of duplicative back-office functionality.

42.2 5.5

January2010

Corridor AS(Norway)

Randstad Professionals AS(Norway)

Corridor AS provides recruitment and supply services of temporary and permanent staff to the accounting, finance, sales, marketing, IT and administrative sectors. Through Corridor AS, Randstad aimed to strengthen recruitment and hiring specialists within the finance and accounting domain and extend this position within the IT and engineering space. The deal also creates a good platform for Randstad's future growth across the Nordic region.

N/A N/A



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