Capstone Partners. Staffing & Talent Management. Market Intelligence for Business Owners Q M&A Update Report. Investment Banking Advisors

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1 M&A Update Report Market Intelligence for Business Owners Q Capstone Partners Investment Banking Advisors BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY

2 M&A Update Report MERGER AND ACQUISITION ACTIVITY CAPSTONE PARTNERS LLC 176 Federal Street 3 rd Floor Boston, MA John Ferrara Founder & President (617) jferrara@capstonellc.com Daniel Schultz Vice President (617) dschultz@capstonellc.com The staffing industry has experienced an active M&A market through mid-august 2013 as a result of an improving economy and a robust operating environment for staffing businesses. Capstone s research indicates that 86 staffing transactions were completed through mid-august, indicating M&A in the sector is on-track to substantially out-perform recent years. A wide variety of staffing companies are represented in this year s transactions; the most notable sectors continue to be healthcare staffing and IT staffing. Industrial staffing firms and companies in the commercial staffing sector are also frequent acquisition targets. Strategic buyers heavily outnumbered private equity buyers in recent activity, accounting for over 90% of closed transactions. A few firms made multiple acquisitions this year, including Landrum Professional Employer Services, Staffing 360, TrueBlue and Corporate Resources. We are witnessing a comprehensive and varied buyer landscape for staffing companies, one that includes an assortment of both corporate and private equity buyers Staffing Industry M&A Transaction Volume YTD 2013 Sources: Capital IQ, Capstone Partners LLC research, Staffing Industry Analysts YTD through August 15, 2013 Buyers of staffing companies continue to be selective, looking for businesses that contribute to their strategic initiatives. Generally speaking, companies with a track record of healthy revenue growth, strong profits, diversified account bases and outstanding management teams (who plan to stay post-transaction) are proving to be attractive acquisition targets. Capstone expects M&A activity in the industry to remain robust in the near-term, as improvements in the job market continue to fuel a growing staffing industry. As businesses of all types continue to shed their wariness of hiring amid a tepid but gradually warming economy, all sectors of the staffing industry are expected to profit. Many companies seek to hire temporary employees over permanent employees to mitigate the financial consequences of the Affordable Care Act. Therefore, temporary employee hiring rates are expected to rise in the second half of

3 SELECTED TRANSACTIONS Tringali Staffing merges with Taylor White Specialized Staffing, Inc. (May 2013) Two Florida companies that focus on providing placement services for accounting and finance professionals, Tringali Staffing and Taylor White Specialized Staffing merged to create the single largest finance and accounting recruitment firm in the Tampa Bay area. Financial details regarding the merger were not announced. The combined entity will operate under the Taylor White name. Both companies ranked in the top-ten for permanent employment firms in the Tampa Bay area by the Tampa Bay Business Journal. A statement from Tringali Staffing on the merger reads, We come together united by a common culture to over-serve our clients needs and to increase market share without compromising our high level of client service. OGH, LLC acquires Locum Leaders, LLC (May 2013) OGH, a provider of staffing solutions for the healthcare and technology sectors, acquired Locum Leaders, a nationwide supplier of locum tenens services to healthcare systems and physician practice management companies. Locum Leaders is one of the fastest-growing locum tenens companies in the U.S. This is an exciting day for our company and I am pleased to have our entire team join the OGH family of companies, said Will Drescher, President of Locum Leaders. With the locum tenens industry expected to grow at a projected 10% rate in 2013, we are pleased to have the backing of OGH to help us further expand and scale our solutions offerings. OGH is backed by Welsh, Carson, Anderson & Stowe, a private equity firm that manages $20 billion of capital and invests in the information/business services and healthcare industries. OGH plans to continue to operate Locum Leaders as a dedicated brand within the locum tenens space and keep the company headquartered in Alpharetta, Georgia. Update Legal, Inc. merges with subsidiary of Conversion Capital LP (March 2013) Update Legal, a supplier of temporary and permanent placements in law firms and corporate legal departments, merged with a subsidiary of Conversion Capital, a private investment firm. The addition of Update expands Conversion s outsourced legal services portfolio, which currently includes investments in TrialGraphix Inc. and Driven. Update Legal ranks third on Staffing Industry Analysts list of largest legal staffing firms with $85 million in U.S. legal staffing revenue in Financial details of the transaction were not disclosed. TrueBlue, Inc. acquires MDT Personnel (February 2013) TrueBlue, a prominent provider of blue-collar staffing, acquired the third-largest general labor staffing company in the U.S., MDT Personnel. The purchase price for the company was $48 million, including $12 million in cash and $36 million in assumed debt. TrueBlue will integrate MDT s operations with those of Labor Ready Holdings, one of its subsidiaries. Steve Cooper, CEO of TrueBlue, said, I m excited to bring our talented teams together so that we can create even more growth by addressing the needs of our combined customers and to attract new customers by delivering business solutions to them through the added expertise and scale we now offer. From the seller s perspective, Mike Traina, MDT CEO, added, The additional resources TrueBlue can offer will enable our customers to continue to receive the quality service MDT has provided. Joining the team also opens the door to more career opportunities for our people. 2

4 SELECTED TRANSACTIONS (CONTINUED) ICON Public Limited Company acquires ClinForce, LLC (February 2013) ICON Public Limited Company acquired ClinForce, including its subsidiary companies Assent Consulting and Metropolitan Research Associates. The acquisition, which included earn-outs worth $3.75 million, totaled $55.8 million in value. ClinForce provides project teams as well as direct hire and contract staffing services to clinical researchrelated industries. ICON is a contract research organization offering its services to various industries in Ireland and the U.S. ICON plans to integrate ClinForce into its DOCS business. The chief motivation for the acquisition, according to ICON s CEO Ciaran Murray, is the difficulties raised by the changing biopharma landscape. The demand for flexible resourcing solutions continues to grow as biopharma companies employ a range of outsourcing models to meet their development goals more efficiently, said Murray. The ClinForce and Assent businesses will significantly expand our resourcing and FSP capabilities in the United States and, when combined with DOCS strong European footprint and growing emerging markets presence, gives us the ability to deliver truly global resourcing solutions. Saksoft Inc. acquires EDP Inc. (January 2013) Saksoft, a business consulting and technology services subsidiary of Indian company Saksoft Ltd., acquired EDP, an employee staffing organization. The financial details of the transaction were not disclosed. The temporary staffing, contract-to-hire and permanent staffing services that EDP offers will supply Saksoft with an additional means of customer acquisitions as it seeks to enhance its capabilities in the U.S. market. Aditya Krishna, CEO of Saksoft, said, EDP s strength is in the information management area and we believe the acquisition is a good fit for our US geography s growth. Saksoft is investing in sales, marketing and delivery capabilities for the U.S. market and EDP will be an additional channel for client acquisition and account management. Georgia Oak Partners acquires TeamOne Logistics (January 2013) Georgia Oak Partners, a private equity firm, invested an undisclosed amount of money in TeamOne Logistics, a provider of workforce solutions to companies with transportation or warehousing needs with a focus on long-term and short-term driver and warehouse staffing needs. The company has 725 employees across 26 states. Jerry Gray, who will remain as President of TeamOne, said, It is important to us that Georgia Oak brings a local, relationship-based approach. We are excited about this next phase of growth and the benefits this partnership will provide to our customers and employees. Michael Lonergan, a at Georgia Oak, added, It has become increasingly challenging for companies with private truck fleets to navigate today s operating environment. We believe TeamOne is wellpositioned to assist companies in managing the various complexities of transportation workforce management. These and other recent industry transactions are shown in the tables on the following pages. The tables indicate the diversity of both sellers and buyers involved in transactions in the staffing & talent management industry. 3

5 SELECTED STAFFING M&A TRANSACTIONS Date Target Acquirer Target Business Description 08/19/13 08/13/13 Staff Payroll of Pensacola Mastech Holdings Healthcare Staffing Landrum Professional Employer Services Accountable Healthcare Staffing 08/01/13 E3 Technologies I-Evolve Inc. 07/31/13 07/29/13 07/29/13 07/24/13 07/23/13 Linkage 07/17/13 Summit Technical Services Baldwin Physician Services The Agency Staffing Gerald Gold & Associates DriveForce Transportation 07/17/13 Profit By Consulting 07/08/13 HGI Healthcare The Reserves Network IPC The Hospitalist Company Peoplelink Staffing Aurico Reports Argosy; BB&T; and Renovus Capital TransForce 07/08/13 Allstar Staffing Decton 07/01/13 06/28/13 Jonathan Roberts Associates Bernard Hodes Group ONS Interactive Accountable Healthcare Staffing Howard-Sloan Professional Search Findly 06/28/13 ETS Staffing Nesco Resource 06/19/13 Personnel 06/18/13 06/12/13 05/31/13 05/28/13 Computer Professionals Crowley Transportation BPS Becker Professional Search InStaff Personnel 05/28/13 Tringali Staffing 05/23/13 05/17/13 05/14/13 05/06/13 STAFFLOGIX Corporation Indecon Sustainable Practices Qwik Staffing Corporate Resource Services Offers payroll, human resources (HR) and employee leasing services in Pensacola. Enterprise Value (mm) EV / LTM Revenue EBITDA Provides healthcare staffing services. Provides IT staff augmentation, project consulting and other IT services. Provides contract staffing services for engineering, software and professional design jobs. Provides post-acute hospitalist services on a contract basis to hospitals. Provides staffing solutions for technical, professional, administrative and industrial positions. Provides employment screening with an emphasis on in-depth interviewing and background investigations. Provides leadership and HR development and talent management services to organizations worldwide. Provides driver leasing and human resource services to the transportation industry and private fleets. Offers permanent and temporary IT staffing and HR outsourcing services. Provides rehabilitation therapy and nurse staffing in clinical settings, such as hospitals and institutions. Provides healthcare temporary, temporary-to-hire, and direct hire staffing services. Specializes in the recruiting and staffing of technical professionals. Provides integrated talent management solutions across the talent lifecycle. Provides staffing and employee management solutions. Provides nationwide job search assistance for both permanent and contract positions. Zyncron Offers IT staffing, recruiting and consulting solutions. TrueBlue Bridge Technical Talent LTN Staffing Taylor White Specialized Staffing Cortech Fahrenheit IT KleanJobs.com Labor Smart Operates as a temporary driver staffing company serving transportation companies. Provides IT hiring, executive search and staff augmentation services. Provides recruiting, staffing, on-site management and human resources consulting services. Places degreed accounting and finance professionals from staff through executive levels. Operates as a full service staffing firm with multiple offices across the country. Provides information technology (IT) staffing services to large and mid-sized companies in the United States. Operates CleanTechRecruits.com an online job search portal. Provides staffing solutions for construction and industrial projects. 05/01/13 Locum Leaders OGH Provides temporary physician staffing services. 05/01/13 MAF Background Screening 05/01/13 HR Initiatives Sarma Global Dynamic Consulting Provides applicants and employee background check and screening services. Provides employee training and human resources (HR) outsourcing services. LTM = last twelve months; EV = enterprise value Source: Capstone Partners LLC research, Capital IQ, company public filings and press releases 4

6 SELECTED STAFFING M&A TRANSACTIONS (CONTINUED) Date Target Acquirer Target Business Description 05/01/13 Merit Resources 05/01/13 04/30/13 04/30/13 04/30/13 The Revolution Group Summit Advisory Group National Prosource Technology Staffing 04/26/13 Cyber 360 Iowa Network Services Staffing 360 Patina Group Offers outsourced human resource management services. Specializes in highly trained personnel for the Cyber Security industry. Provides permanent placement, contract-to-hire, staffing and consulting services. Enterprise Value (mm) EV / LTM Revenue EBITDA $ x - Atterro Provides staffing services in Texas. Solü Technology Partners Staffing /24/13 FleetJobs.com JobsInLogistics.com 04/10/13 Labor All Personnel Private Investor 03/14/13 Employer Flexible HR, Provides V.I.P. Staffing (Comm l Staffing Unit) 03/14/13 Update Legal Conversion Capital 03/08/13 Mixtent Facebook 03/06/13 Exam Design Pearson VUE 02/20/13 Campus2careers SureScore 02/19/13 OA Nurse Travel Medical 02/15/13 ClinForce and Akos ICON 02/07/13 02/06/13 02/05/13 IS&T Staffing Group JAWOOD Business Process Perioperative Nurses Genuent Genpact Alliant 02/04/13 MDT Personnel TrueBlue 01/24/13 01/15/13 01/08/13 Forthright Consulting BMT Staffing Jonathan Scott International 01/07/13 TeamOne Logistics 01/03/13 01/01/13 Personally Yours Staffing Salient Federal Division Trellist Convention Models and Talent trustaff 01/01/13 EDP (Pennsylvania) Saksoft Georgia Oak Partners Corporate Resource Services Kavaliro Staffing Services A staffing and recruiting company specializing in IT and serving both national and regional clients. Identifies and hires cyber security professionals for consulting assignments in the United States. Operates a website to search for jobs in the transportation industry. Operates as a staffing agency offering employment services. human resource outsourcing, professional search, recruiting and staffing services. Provides candidates for temporary and permanent jobs in law firms and corporate legal departments. Offers a web-based product that ranks job-related skills and talents. Develops examination software for use in high-stakes hiring decisions. Offers online recruitment services for entry level jobs and college internships. Places healthcare professionals in short-term, longterm and contract-to-hire assignments. Offers contract staffing, permanent placement and executive search. Offers retained search and contingent staffing solutions for the IT sector. Provides IT consulting services to the healthcare payer industry. Provides OR, PACU, endoscopy and pain management personnel to hospitals and surgical centers. Supplies temporary blue-collar labor to construction, event staffing, disaster recovery and hospital sectors. Offers marketing and technology professional services through flexible outsourcing and agency staffing. $ x - $ $ $ Provides staffing for events in the U.S. and Canada. Provides permanent placement and contract staffing to healthcare informatics and supply chain sectors. Provides workforce solutions to companies with transportation or warehousing needs. Provides staffing solutions, including customized HR strategies and solutions. Provides staffing solutions to Fannie Mae and the federal marketplace. Provides IT contract, temporary and permanent staffing solutions. LTM = last twelve months; EV = enterprise value Source: Capstone Partners LLC research, Capital IQ, company public filings and press releases 5

7 PUBLIC COMPANY TRADING & OPERATING DATA Price Market Enterprise LTM EV / LTM Company 9/30/13 Cap Value Revenue EBITDA Margin Revenue EBITDA AMN Healthcare Services Inc. $13.76 $ $ $ $ % 0.8x 10.9x CDI Corp. $15.31 $ $ $ 1,082.8 $ % 0.3x 7.4x Cross Country Healthcare, Inc. $6.04 $ $ $ $ % 0.4x 30.5x Heidrick & Struggles International Inc. $19.06 $ $ $ $ % 0.6x 9.0x Kelly Services, Inc. $19.47 $ $ $ 5,411.3 $ % 0.1x 8.7x Kforce Inc. $17.69 $ $ $ 1,089.3 $ % 0.6x 12.0x Korn/Ferry International $21.40 $ 1,055.3 $ $ $ % 1.0x 9.5x ManpowerGroup Inc. $72.74 $ 5,694.7 $ 5,947.9 $ 20,184.5 $ % 0.3x 10.2x Monster Worldwide, Inc. $4.42 $ $ $ $ % 0.7x 4.2x On Assignment Inc. $33.00 $ 1,768.6 $ 2,123.8 $ 1,624.2 $ % 1.3x 12.7x Resources Connection Inc. $13.57 $ $ $ $ % 0.8x 9.8x Robert Half International Inc. $39.03 $ 5,419.1 $ 5,173.6 $ 4,154.3 $ % 1.2x 12.1x TrueBlue, Inc. $24.01 $ $ $ 1,492.9 $ % 0.6x 12.1x Mean 6.8% 0.7x 11.5x Median 7.1% 0.6x 10.2x Harmonic Mean 4.0% 0.4x 9.6x Last Twelve Month Margin Performance 60% EBITDA Margin Gross Margin % 54.6% 50% 40% 30% 20% 10% 0% 7.1% 28.8% 3.4% 19.4% 1.2% 25.2% 7.1% 31.1% 16.4% 1.6% 32.5% 31.9% 11.0% 4.9% 16.6% 2.9% 15.8% 10.3% 29.9% 40.3% 38.2% 10.3% 7.8% Source: Capital IQ as of September 30,

8 CAPSTONE PARTNERS: RECENT HUMAN CAPITAL TRANSACTIONS Capstone s professionals have completed several transactions in the human capital and consulting sector, including business sales, debt financing, and the provision of valuation advisory services, as well as acquisition services. Recently, Capstone advised KMS Software Company LLC in its sale to SAP AG. KMS is a leading provider of web-based human capital management software and solutions focused in the area of electronic on-boarding, off-boarding, forms management and new employee engagement. The acquisition of KMS serves to provide SAP s SuccessFactors business unit with a market leading on-boarding solution to bolster its workforce management solutions. CAPSTONE PARTNERS: STAFFING INDUSTRY CREDENTIALS has acquired debt financing CERTIFIED IT & ITRICITY FREEDOM DATA NORTHERN HEALTHCARE CAPITAL valuation & financial advisory valuation & financial advisory ARIES GROUP INC. MORRIS, NICHOLS, ARSHT & TUNNELL LLP camden vale 8

9 THE STAFFING INDUSTRY TEAM John Ferrara, Founder & President (617) John Ferrara serves as the Managing Partner of Capstone, responsible for the firm s investment and merchant banking operations, as well as managing client transactions. During his tenure as Managing Partner, Capstone has completed three acquisitions to expand the firm s presence from Boston to include seven offices internationally, culminating in the Global Investment Banking Boutique of the Year award in Over his 25+ year career in mergers & acquisitions, venture capital and management consulting, John has executed well over 150 transactions and related engagements. His entrepreneurial endeavors have included serving as a founding member of seven financial service practices and a principal shareholder in five start-up businesses. Prior to 2002, when he acquired the practice he initially founded from Arthur Andersen to form Capstone, John served as a Regional Managing Partner with Andersen Corporate Finance LLC. While with Andersen, John held various national and global leadership positions. He started his career in Lehman Brothers' M&A group in New York, London and Riyadh, later becoming a founding member of Rodman & Renshaw's M&A practice in New York. After a break to compete in Australia's semi-professional baseball league, John joined The Deloitte Consulting Group in Los Angeles to focus on turnaround and interim management engagements. John recognized as Investment Banker of the Year in 2012, Deal Maker of the Year in 2010 and received the 40 Under 40 award for entrepreneurial excellence in He is the founder of the Spirit Triumph Cancer Foundation, author of the children s book "Beyond the Waterspout" and former owner in the Holyoke Sox, a baseball franchise in the NECBL. John earned his MBA from The Anderson School at UCLA and the London School of Economics. He holds dual BA degrees from Wesleyan University and is qualified as a General Securities Principal. Daniel Schultz, Vice President dschultz@capstonellc.com (617) Dan oversees Capstone s national business development and industry coverage activities, working closely with current and prospective clients of the firm on matters related to corporate sales, recapitalizations, mergers & acquisitions and growth financings. In his role, Dan is able to deliver specific market intelligence to clients regarding M&A, financing, strategic, industry and competitive trends. Prior to spearheading the firm s business development and market initiatives, he was a Vice President in Capstone s M&A group, managing numerous successful transactions across a variety of industries. Dan also gained hands-on transaction experience as an investment banker at Headwaters MB. He started his career with Ernst & Young s National Professional AABS practice in New York and later worked in Assurance and Advisory Business Services in the Denver office. Dan received a BE in Biomedical Engineering with a Business Minor from Vanderbilt University. He earned an MBA and a Master of Accountancy from the Daniels College of Business at the University of Denver. 8

10 ABOUT CAPSTONE PARTNERS Capstone Partners LLC is a leading international investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. The firm provides merger & acquisition, private placement, corporate restructuring, valuation and financial advisory services. Capstone maintains various industry specialties including one in the Staffing & Talent Management industry. The firm also possesses merchant banking capabilities to actively co-invest in transactions. Additional information about Capstone Partners can be found at LEADERSHIP TEAM NATIONAL John Ferrara Founder, President (617) jferrara@capstonellc.com CHICAGO Ted Polk (312) tpolk@capstonellc.com LOS ANGELES David Bench (949) dbench@capstonellc.com SAN DIEGO & SILICON VALLEY David Michaels (858) dmichaels@capstonellc.com BOSTON Jacob Voorhees Director and Principal (617) jvoorhees@capstonellc.com LONDON John Snead jsnead@capstonellc.com PHILADELPHIA Eric Williams (215) ewilliams@capstonellc.com CORPORATE RESTRUCTURING Brian Davies (617) bdavies@capstonellc.com Capstone Partners Investment Banking Advisors World Class Wall Street Expertise. Built for the Middle Market Capstone Partners LLC. All rights reserved.