STAFFING & TALENT MANAGEMENT Q BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA CONTACTS

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1 STAFFING & TALENT MANAGEMENT CONTACTS John Ferrara Founder, President (617) Daniel Schultz Director of Business Development (617) BOSTON CHICAGO LONDON LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY TAMPA MERGERS AND ACQUISITIONS: 2014 REVIEW Merger & acquisition activity in the staffing sector outperformed other segments in 2014, as the industry benefitted from a much improved employment situation, making acquisitions more attractive. Capstone s research indicates that 182 staffing & talent management transactions were reported in 2014, the highest figure since 2007 and a new industry record Staffing industry employment has now returned to pre-recession levels as businesses continue to increase the size of their flexible and permanent workforces in response to a rise in demand for their products and services. A favorable operating environment and positive financial results for industry participants have attracted both corporate and private equity buyers. All sectors of the industry are represented in recent transactions, including temporary and permanent staffing, executive search and recruitment, PEO and others. In addition, there is healthy activity in the various market verticals including IT, healthcare, legal, finance & accounting, commercial and industrial staffing. Sellers of high performing staffing businesses are attracting strong interest from multiple buyers, resulting in healthy valuations and attractive offers OUTLOOK Staffing & Talent Management Industry: M&A Transaction Volume Sources: Capstone Partners LLC research, Capital IQ, Thomson Reuters U.S economic growth is expected to accelerate in 2015, resulting in the most favorable hiring outlook since With such positive conditions as a backdrop, Capstone expects strong M&A activity in the industry in 2015, driven by eager, well-capitalized buyers. These include corporate buyers, who as a group have an unprecedented level of cash on their balance sheets, as well as private equity firms, which collectively have an estimated $535 billion of capital to deploy. The M&A cycle appears to be entering its boom phase, during which activity and valuation premiums often rise sharply. The deal closing pace has improved, with the due diligence and documentation timeline becoming more accelerated. The end result is a very attractive seller s market, which could yield exceptional opportunities for privately held middle-market companies

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3 $Billions Staffing & Talent Management Trends in hiring practices indicate that the staffing industry will continue to play an increasingly vital role in the U.S. employment market. INDUSTRY GROWTH SUPPORTS M&A ACTIVITY The staffing industry is sensitive to economic conditions, with industry results improving along with advancements in the economy. The industry gained substantial momentum over the last five years, outpacing economic growth and expanding at a CAGR of approximately 7% over that period. The $134 billion industry is projected to grow at a 4% compound annual rate to $163 billion in $180 U.S. Staffing Industry Revenue and Projected Growth, $160 $140 $120 $100 $80 $60 $40 $20 $0 Source: IBIS World The industry is expected to remain strong for the next several years, supported by better economic conditions, falling unemployment and improved business sentiment. Trends in hiring practices indicate that the staffing industry will continue to play an increasingly vital role in the U.S. employment market, particularly among labor-intensive businesses seeking to improve the quality and flexibility of their workforces in order to more effectively compete and adjust to changing market conditions. Temporary staffing, executive recruitment and permanent staffing services are all expected to be in high demand, as are the various vertical markets shown below. Industry Revenue by Market Accounting & Financial 4% Other 14% Industrial & Warehouse 27% Engineering & Science 5% IT 13% Healthcare 14% Office, Clerical & Admin. 23% Source: IBIS World Capstone Partners LLC 2

4 As customer demands increase, staffing firms are looking to differentiate their offerings by making acquisitions to expand their services, add vertical market expertise, and expand their geographic reach. STAFFING INDUSTRY GROWTH DRIVERS Several market conditions are converging to support healthy growth in the staffing & talent management industry, including those outlined below. Economic & Job Growth: Employers in the U.S. added nearly 3 million jobs in 2014, making it the best year for job growth since Both CEO optimism and hiring plans are trending up for 2015, according to the Institute of Supply Management. Manufacturing employment is expected to increase 1.5% in 2015 and non-manufacturing employment is expected to rise 1.7%. Employment gains will be driven by GDP growth, which the National Association for Business Economics (NABE) predicts will reach 3.1% in 2015, a marked improvement over the 2.2% rate in Such economic growth is likely to sustain strong job growth and accelerate wage increases, all positive indicators for the staffing industry. Talent Shortage: As the economy improves and hiring needs grow, employers are expected to rely more on the staffing industry for qualified job candidates. Difficulty locating talent and a lack of skills among applicants are some of the most significant issues that employers face. This talent crunch has resulted in businesses turning to staffing professionals to find, hire and train employees. Healthcare Reform: The implementation of the Patient Protection and Affordable Care Act ( PPACA ), which requires employers with more than 50 fulltime employees to provide affordable healthcare to workers, is also affecting demand. The burden of providing health insurance has provided another incentive for businesses to use temporary labor, which typically requires only minimal levels of essential coverage. Human Resources Outsourcing Trends: Staffing agencies are providing more complete HR outsourcing and value-added services that increase the length and depth of their relationships with customers. These services include Managed Service Provider ( MSP ) and Recruitment Process Outsourcing ( RPO ) solutions, both of which offer efficiency and cost savings benefits to employers. Increased Role of Technology: The use of technology in the recruitment and hiring process is substantial, from automated screening processes to psychometric online evaluations. As a result, employers are turning to the expertise of staffing firms to manage the more sophisticated hiring process. Business Process Outsourcing: As companies seek to outsource a greater share of their internal business processes, they are likely to utilize more temporary employees who possess the necessary skillset and background to complete specific tasks. Growing Professions: The increasing complexity of information technology systems and the migration to cloud-based systems is driving demand for IT staffing services. At the same time, demographic trends in the U.S. along with the impact of PPACA, is increasing demand for healthcare services, with hospitals continually under pressure to keep talented personnel on staff. These dynamics bode well for staffing companies active in the IT and healthcare markets. As customer demands increase, staffing firms are looking to differentiate their offerings, using acquisitions to expand their services, add vertical market expertise and expand their geographic reach. Companies with a track record of strong growth and margins, talented management teams, deep client relationships and a diversified base of customers are in high demand by acquirers. Capstone Partners LLC 3

5 SELECT M&A TRANSACTIONS Date Target Acquirer Target Business Description 02/05/15 CTPartners Executive Search DHR International 02/05/15 Haney/Lowderman The Wetrich Group 01/20/15 01/19/15 01/05/15 Precision Professionals VISTA Staffing Solutions EmployBridge Holding Company CRMPoint.net EmCare Eastern Staffing 12/22/14 Apollo Consultants BANK W Holdings 12/17/14 Onward Healthcare AMN Healthcare 12/16/14 Whitney Partners Penrhyn International 12/12/14 Scribe Solutions 12/04/14 Veredus Corporation Hays General Employment Enterprises 11/20/14 Oasis Outsourcing Stone Point Capital 11/18/14 11/14/14 Bridge Employment Services Hyperspring and 50% interest in IntelliQlik Provides retained executive search services worldwide. Provides career transition services to healthcare executives. Provides IT search services to multi-national firms and growing organizations in the United States. Provides temporary physician staffing and permanent physician search services. Provides industry-specific staffing solutions and workforce management strategies. Operates as a staffing firm serving the accounting and finance sectors. Provides integrated travel and local per diem staffing for nursing and allied health professionals. Provides executive search services to financial institutions, funds and MNCs. Engages in recruiting, staffing and managing emergency department medical scribes. A technical staffing company, provides information technology (IT) staffing services in the United States. A professional employer organization, provides workforce solutions in the United States. Enterprise Value ($mm) Revenue EV / LTM EBITDA $ x 4.4x $ x - $ $ $ x Employee Solutions Offers full-service employment agency services. GSE Power Systems 11/13/14 Hirease Accurate Background 11/01/14 Shipyard Staffing ARC Industries; Succession Capital Provides staff augmentation, training and development and plant operations support services. Operates as a background screening company that provides pre-employment verification services. Provides recruitment & placement of skilled tradesmen for the shipyard/marine industry. $ /01/14 Gaines International Allen Austin Provides executive search and recruitment services. 10/30/14 PRO Unlimited Investcorp Bank 10/22/14 10/13/14 Premier Physician Services Priority Staffing Services Team Health Holdings 10/03/14 Vaco Quad-C Management 10/03/14 AdminHR Lyons HR 10/02/14 Internships Chegg Develops contingent workforce management solutions for Global and Fortune 500 companies worldwide. Provides emergency department (ED) management and staffing services. $ PriorityWorkforce Provides temporary placement services. Provides placement services for senior-level accounting, financial, IT & administrative staff. A professional employer organization, provides human resources services for small to mid-sized businesses. Interactive tools & services to enable students, employers and educators to optimize internships. $ /30/14 The Johnsson Group Salo Project Provides financial and human resources staffing. 09/29/14 Kwik Jobs Labor Smart 09/26/14 Clearwater Legal Staffing Choice Legal Solutions 09/22/14 Discovery Services etera Consulting 09/18/14 Synergy Seven Xtreme Consulting Group Provides temporary skilled/unskilled manpower for general contractors and related companies. Provides staffing services to legal companies. Provides managed review and legal staffing solutions to law firms, legal departments and government. Provides contract technical placement, professional services/solutions, direct hiring and HR services. Capstone Partners LLC 4

6 SELECT M&A TRANSACTIONS (CONTINUED) Date Target Acquirer Target Business Description 09/15/14 09/10/14 09/09/14 Allied Health Division of PARX Group Emergency Medicine Specialists Gulf-to-Bay Anesthesiology Accountable Healthcare Enterprise Value ($mm) Revenue EV / LTM Provides healthcare staffing solutions. Team Health Holdings Provides physician staffing solutions to hospitals. Team Health Holdings Provides anesthesia and pain management services to hospitals and surgery centers. EBITDA 09/08/14 Heartland Anesthesia Team Health Holdings Offers anesthesia management services for hospitals. 09/04/14 09/03/14 Las Vegas branch of Elite Resources Teaneck Emergency Physicians Millenium Staffing Solutions 09/03/14 Cavoure Chartwell Partners 09/02/14 CVPartners Addison Group 09/02/14 Trident Emergency Physicians 08/21/14 SumTotal Skillsoft 08/20/14 08/06/14 08/04/14 Sound Advice Consulting Services Sally White & Associates himagine solutions (Kforce Healthcare) Provides staffing services to businesses in the Las Vegas, Nevada area. Team Health Holdings Manages and staffs emergency departments. Team Health Holdings Aequor Technologies IMPACT Group Beecken Petty O'Keefe & Company 08/01/14 RISE Therapy Services TNR Staffing 07/31/14 Professional Computer Resources 07/31/14 HLP Solutions Mitchell Martin 07/20/14 07/11/14 Spencer Reed Group, Commercial Staffing Metz&Baum Healthcare 07/08/14 RezBiz Talent 07/07/14 MedAscend 07/01/14 Actium Consulting 07/01/14 Personnel Profiling Provides executive search services for clients across multiple industries. Offers executive recruiting services for senior level positions in technical fields. Offers staff for physician practices and manages hospital emergency departments. Provides integrated human resources solutions to customers worldwide. Offers staff augmentation services to the life sciences sector in the United States. Provides spouse/partner career management, relocation assistance and outplacement solutions. Offers staffing, consulting and outsourcing services for health information technology. Provides therapists staffing services for geriatric home care settings. $ CRG Workforce Offers staffing services specializing in IT staffing. Elwood Staffing Services Source One Healthcare Professionals Accountable Healthcare Staffing Peoplelink Staffing Solutions Mountjoy Chilton Medley Provides contract-to-hire, temporary-to-hire, direct hire and contingency workforce recruiting services. Provides temporary commercial staffing services. Provides healthcare staffing services in various specialties. Provides professional resume writing services, LinkedIn makeover and related career services. Provides medical staffing services in various medical specialties including physicians and nurses. Provides project-driven IT staffing and consulting services. Provides employment assessments, employment screening and hiring assistance. 07/01/14 Retail Search Group PrincetonOne Provides recruiting services for the retail industry. 07/01/14 bkoaustin HireBetter 06/30/14 Rollouts Ingram Micro 06/28/14 CECOR Staffing Essential Personnel 06/26/14 Provides chief financial officers and chief information officers on an interim or project basis. Provides technical staff for cable rollout and facility projects in the United States and Canada. Provides temp, temp-to-hire, permanent placement, contract, executive search and direct to hire staffing. Sullivan Healthcare Consulting Jackson Healthcare Provides interim staffing to hospitals and ambulatory surgical centers in the United States and Canada. Capstone Partners LLC 5

7 SELECT M&A TRANSACTIONS (CONTINUED) Date Target Acquirer Target Business Description 06/25/14 AJASA Technologies TechDigital Corporation 06/15/14 My Therapy Company Shore Capital Partners 06/04/14 06/02/14 Performance-Based Selection Medical Staffing Network Healthcare PSI Services Cross Country Healthcare 06/02/14 Seaton TrueBlue 05/20/14 Hire Talent Arrow Strategies 05/12/14 Acclaimd 05/09/14 Advance Employment Enterprises 05/02/14 FD Careers 04/28/14 PartnerJD eboss Online Recruitment Solutions AccessPoint Bright Mountain Holdings TrustPoint International 04/25/14 Boxwood Technology Naylor 04/22/14 Montgomery Professional Services Global Upside 04/18/14 HireStrategy Addison Group 04/10/14 Integral Resources Noor 04/09/14 Parallel Partners Next Step Systems 04/01/14 Profiles International John Wiley & Sons 03/27/14 PeopleAdmin Vista Equity Partners 03/13/14 Engineering Laboratories 03/13/14 SchoolSpring Netchemia 03/12/14 ProSearch Marcum Search 03/03/14 Nationwide Screening Services 03/03/14 Total Rehab Services Provides staffing and managed services for the technology consulting community. Offers therapists and special education teachers for schools. Provides employee selection, development and retention services. Provides healthcare staffing solutions on a temporary and contract basis. Provides HR outsourcing and recruiting services in the United States and internationally. Offers recruitment services for information technology and engineering professionals. Provides social media-based human resource recruiting tools. Specializes in recruiting, screening, qualifying and evaluating potential employees. Operates a job search and career website for firefighters in the United States. Provides e-discovery and litigation support staffing solutions for law firms and corporations. Provides online career centers, career fairs and careerrelated services to employers. Offers recruiting, temporary staffing and onsite outsourced accounting services. Provides contract, direct hire and executive search solutions for IT, accounting and other positions. Provides finance, IT and legal recruiting services for the legal community. Engages in the recruitment of information technology personnel for direct hire positions. Provides employment assessments and human resource management solutions. Provides talent and performance management solutions for higher education and government. Enterprise Value ($mm) Revenue EV / LTM EBITDA $ x - $ x 15.2x $ x 9.6x ASG Renaissance Offers engineering and technical staffing services. Corporate Resource Services Lutheran Social Services of Michigan 02/28/14 W2 Financial Staffing CRG Workforce 02/27/14 New Directions Search ZRG Partners 02/26/14 The Delta Companies Mitsui & Co. 02/24/14 TalentBin Monster Worldwide Provides online employment solutions for job seekers and recruiters in the education market. Provides staffing services to small businesses and large corporations in the United States. Provides employee, tenant and vendor screening services. Provides therapy staffing services to hospitals, home care agencies, school systems and others. Provides staffing services for professionals in the fields of accounting, finance and human resources. Offers executive recruitment consulting and search services to manufacturing and service companies. Provides permanent and temporary staffing services for physicians and allied healthcare professionals. Operates a talent search engine to assist HR recruiters in finding candidates. LTM = Last Twelve Months; EV = Enterprise Value Source: Capstone Partners LLC research, Capital IQ, Bloomberg, company public filings and press releases Capstone Partners LLC 6

8 PUBLIC COMPANY TRADING & OPERATING DATA Price Market Enterprise LTM EV / LTM Company 2/15/15 Cap Value Revenue EBITDA Margin Revenue EBITDA Adecco S.A. $76.22 $ 13,650.3 $ 15,145.3 $ 25,002.8 $ % 0.6x 15.5x AMN Healthcare Services Inc. $20.56 $ $ 1,095.3 $ 1,005.0 $ % 1.1x 13.0x CDI Corp. $18.02 $ $ $ 1,133.4 $ % 0.3x 8.4x Cross Country Healthcare, Inc. $11.13 $ $ $ $ % 0.8x 36.0x Heidrick & Struggles International $23.30 $ $ $ $ % 0.6x 7.4x Kelly Services, Inc. $18.00 $ $ $ 5,562.7 $ % 0.1x 12.3x Kforce Inc. $23.24 $ $ $ 1,217.3 $ % 0.7x 13.6x Korn/Ferry International $30.35 $ 1,528.6 $ 1,254.5 $ 1,000.8 $ % 1.3x 9.7x ManpowerGroup Inc. $77.51 $ 6,134.1 $ 5,904.0 $ 20,762.8 $ % 0.3x 7.3x On Assignment Inc. $37.69 $ 1,973.0 $ 2,346.8 $ 1,809.3 $ % 1.3x 13.1x Randstad Holding NV $54.18 $ 9,743.4 $ 10,497.7 $ 21,495.6 $ % 0.5x 15.9x Resources Connection Inc. $17.46 $ $ $ $ % 0.9x 11.1x Robert Half International Inc. $61.42 $ 8,152.6 $ 7,866.8 $ 4,695.0 $ % 1.7x 14.4x TrueBlue, Inc. $22.79 $ $ 1,148.5 $ 2,174.0 $ % 0.5x 10.3x EV = enterprise value; LTM = last twelve months $ in millions, except per share data NM = Not Meaningful; NA = Not Available Mean 6.2% 0.8x 13.4x Median 5.0% 0.6x 12.7x Harmonic Mean 3.8% 0.5x 11.5x Last Twelve Month Margin Performance 45% 40% EBITDA Margin Gross Margin % 38.4% 41.0% 35% 30% 25% 30.4% 25.7% 31.6% 30.8% 28.6% 31.8% 24.7% 20% 18.4% 18.6% 16.3% 16.8% 18.3% 15% 10% 5% 0% 3.9% 8.4% 3.3% 2.1% 8.2% 1.0% 4.8% 13.0% 3.9% 9.9% 3.1% 8.5% 11.6% 5.1% Source: Capital IQ as of February 15, 2015 Capstone Partners LLC 7

9 CAPSTONE PARTNERS: STAFFING & TALENT MANAGEMENT TRANSACTIONS Capstone s professionals have completed several transactions in the staffing & talent management sector, including business sales, debt financing, and the provision of valuation advisory and acquisition services. Capstone has represented clients across various specialties including staffing, onboarding support, on-site workforce management solutions, corporate training and consulting. This focus allows Capstone to provide staffing & talent management companies with real-time transaction feedback and immediate access to key decision makers among acquirers and investors. CONFIDENTIAL CONFIDENTIAL corporate sale (IN PROCESS) corporate sale (IN PROCESS) has recapitalized with Temporary & Permanent Staffing Services Temporary Staffing Services has has acquired debt financing CERTIFIED IT I.T. & ITRICITY FREEDOM DATA NORTHERN HEALTHCARE CAPITAL valuation & financial advisory ARIES GROUP INC. camdenvale Has been Has Has been acquired been by by Capstone Partners LLC 8

10 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, Director of Business Development 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. Capstone Partners LLC 9

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12 CAPSTONE S OFFICE LOCATIONS BOSTON 176 Federal Street 3rd Floor Boston, MA (617) CHICAGO 200 South Wacker Drive Suite 3100 Chicago, IL (312) LONDON 42 Brook Street London W1K 5DB United Kingdom +44 (0) LOS ANGELES Avenida de la Carlota Suite 600 Laguna Hills, CA (949) PHILADELPHIA 1515 Market Street 12th Floor Philadelphia, PA (215) SAN DIEGO High Bluff Drive Suite 200 San Diego, CA (858) SILICON VALLEY 228 Hamilton Avenue 3rd Floor Palo Alto, CA (650) TAMPA 1550 W Cleveland Street Suite 10 Tampa, FL (813) ABOUT CAPSTONE PARTNERS Capstone Partners LLC is a premier investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. The firm provides corporate sale & divestiture, 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 has a merchant banking capability to actively co-invest in transactions. Headquartered in Boston, Capstone has offices in Chicago, London, Los Angeles, Philadelphia, San Diego, Silicon Valley and Tampa. For more information about our expertise, please visit World Class Wall Street Expertise. Built for the Middle Market Capstone Partners LLC. All rights reserved.