Transcript Slide 1

Private equity and the recruitment sector
Contents
1.
Inflexion overview
2.
Why we like recruitment and staffing businesses
3.
Learning points from our deals
4.
Making your company attractive to private equity
5.
Valuation metrics
Inflexion Overview
•
An entrepreneurial and highly active investor
•
£850m under management
•
Investing a new £475m fund at £10-75m per deal
•
Seeking UK based, high margin, niche leaders
•
Together our portfolio companies generate £800m sales, £150m EBITDA, and employ
over 8000 people
HOUSE OF THE YEAR
September 11
FUNDRAISING OF THE YEAR
September 11
FUNDRAISING OF THE YEAR
April 11
3
Strong international footprint and offices in Brazil, India & China
Griffin
FDM
Phlexglobal
NPW
Asperity
Rhead
SMD
CTC Aviation Group
Ideal Shopping Direct
Trading locations of ex portfolio
Jack Wills
Aspen distributes to 70 countries
4
History of success in recruitment and staffing
7 years, 4 investments and a deep understanding of industry dynamics
Specialist healthcare
recruitment
Specialist SAP
recruitment
Specialist employment
service
Specialist IT graduate
recruitment
2008 - 2010
2005 - 2011
2006 +
2010 +
Gross
investment
Total returns
£m
£m
33.1
90.1
6.6
Returns
multiple
Net Fee CAGR EBITDA CAGR
%
%
2.7x
43%
42%
28.8
4.4x
22%
18%
9.7
N/A
N/A
20%
27%
11.7
N/A
N/A
36%
43%
ESTIMATED TOTAL
61.1
217.8
3.6x
INDIVIDUAL AVERAGE
15.2
54.5
3.6x
34%
34%
5
Why we like recruitment and staffing businesses
1.
Able to dominate a niche/control scarce resource
2.
Capable of rapid growth
3.
International potential
4.
Low capex, operationally geared
6
The common characteristics of our success stories
1.
Dominant market position/control of scarce resource
2.
Solving a problem
3.
Margins more important than volume
4.
Scalable structures
5.
Most of operations on a single site
6.
Strong management
7.
Focus on the exit from Day 1
7
The common development areas in our deals
Broaden market
Invest in
infrastructure
Go international
Invest in people
Expanded into
complex care
Replaced IT platform
N/A
Focused on marketing
and operational
excellence
Added Red Services
Built financial
structure to double
business
Sweden, Switzerland
and Brazil
Built out team to cope
with 300% revenue
growth
Operations scaled by
400%
Germany, USA,
Switzerland,
Luxemburg, Hong
Kong and Singapore
Developed
international, product
and sector teams
Added Murex, Misys
and new verticals
8
Learning points from our deals
9
Independent Clinical Services
Business overview
•
•
•
Leading provider of temporary healthcare staff
including nurses, community care workers,
locum doctors, GPs and other healthcare
specialists
EXIT ROUTE
RETURNS
Sold to Blackstone Group
2.7x / IRR 82% in 22 months
Development under our ownership
• Pre
acquisition
Specialism in mission critical staff such as
anaesthetists, surgical nurses and support staff
• IFX invests at
c.4.2x
EBITDA
• Continued
geographical
reach
expansion
Had new Complex care in the home division,
growing at 40% pa
• Pursued
several
acquisitions
• Improved
• Exit to
Blackstone
achieved at
7.6x EBITDA
quality of
earnings
• Investment in
20.0
Complex Care
Key learning points
Strength through adversity
•
Scalability protects margin
•
Strong focus on customer service
•
Growth and quality enhancement
•
Well positioned for exit
15.0
ON EXIT
10.0
EBITDA (£M)
•
5.0
0.0
2007
2008
2009
Year end Dec
2010
Red Commerce
Business overview
•
EXIT ROUTE
RETURNS
Sold to Dunedin Capital Partners
4.4x / IRR 34% in 5 years
Development under our ownership
Leading supplier of temporary and permanent
staff for global SAP implementations
• Appointed
• Pre
acquisition
•
80% of the business is in German- speaking
Europe
new
Chairman
• Appointed
new FD
• Invested in
• Promoted
Business
Development
Function
Sales Director
to CEO
• US
market
entry
• Extended into
• New CRM
• Launched
‘Red
Solution’
service
Central Europe
system installed
Key learning points
Dominate the niche
•
Control pricing and drive expansion
•
Expand service line
•
Great team delivers great results
5.0
4.0
EBITDA (£M)
•
6.0
ON EXIT
(BUDGET)
3.0
2.0
1.0
0.0
2006
2007
2008
2009
Year end March
2010
2011
2012
FDM Group
Business overview
•
•
International IT services company specialising in
the provision of outsourced IT staffing solutions
to large blue chip organisations
Trains high quality IT graduates for international
clients through its academy program
SECTOR
HISTORIC EBITDA
IT Services
£16.8m
DATE
DEAL TYPE
February 2010
Public-to-Private
Development under our ownership
• Pre acquisition
• Consultants numbers for
2010 62% ahead of
management plan
• New York based training
Academy opened in July
2010
Key learning points
• New Hong
Kong office
opened
• Targeting to
achieve1,300
consultants
(338 at
investment in
Dec 2009)
• Reviewing Academy
Unique offering drives super-performance
•
Massively scalable
•
Incentivisation drives performance
apprentice in Europe
BUDGET
EBITDA
(£M)
•
Year end Dec
How to optimise the attractiveness of your company to private equity
1.
Dominant market position/control of scarce resource
• Prove market share
• Create or deepen the niche
• Acquire competitor or hold discussions which PE can then fund
2.
Solving a problem
• Demonstrate you are the “go-to” choice for employers and candidates, not an outbound call centre
3.
High margins
• Resist the chasing of volume by lower margin contracts – It’s very hard to get back once gone
• Margins are the benchmark of quality
4.
Scalable structures
• Single sites
• Strong IT
• Interviewers on per hour basis
5.
Strong management
•
Staffing businesses are highly morale and leadership dependent
•
Fix any gaps or issues early – instil confidence in the buyer
13
Quoted company valuations
EV / 2013F EBITDA
Medium sized players trade at a
premium compared to the smallest
tier…
14x
We observe more diversity in majors’
ratings – but overall they benefit from
Michael Page , £1,154m,
higher ratings
13.6x
13x
12x
The smallest listed players
are rated the lowest…
11x
Power trend
line
EV / 2013F EBITDA.
10x
Robert Walters , £127m, 9.2x
SThree , £318m, 9.2x
9x
Prof f ice , £177m, 7.9x
Randstad, £4,885m, 9.0x
Hays , £1,298m, 8.8x
Brunel , £590m, 8.2x
8x
Robert Half , £2,192m, 8.5x
CDI Corp., £203m, 7.5x
Amadeus Fire , £124m, 6.8x
7x
6x
Adecco , £6,631m, 8.7x
Netw orkers International ,
£43m, 5.8x
InterQuest Group , £18m, 5.8x
On Assignment , £589m, 6.1x
Matchtech Group , £59m, 5.4x
5x
Staf f line Group , £60m, 5.1x
4x
Harvey Nash, £38m, 4.3x
Manpow erGroup, £2,033m,
6.0x
USG People, £557m, 5.9x
Kelly Services , £377m, 5.2x
Impellam Group , £164m, 3.6x
3x
10
Source: Mergermarket, DC Advisory
intelligence
100
EV (£m)
1,000
10,000
14
Recent transaction multiples
PE
Acquiror
Target
EV (£m)
100
2012
Corporate
Acquiror
EV/EBITDA
Target
EV (£m)
75
n.a.
234
EV/EBITDA
6.5x
6.2x
6.0x
6.5x
10x 6.2
6.0
2011
44
n.a.
n.d.
n.a.
132
6.5
437
26
16
55
6.2
6.0
6.2
6.5
6.0
75
5.0x
6.5
Orion
6.2x
2010
110
110
n.a.
8
4
5
6.0x
6.5x
11.5x
10.7x
n.a.
10.7x
3
5
11
2
6.0x
7.0x
6.5x
6.2x
n.a.
6.3x
5.3x
n.a.
11.5x
7.5x
4.8x
n.a.
6.2
25
2009
30
Peter Rowley
4.7x 6.0
6.2x 6.5
6.0x
5.6x
6.0x
175
18
6.5x
PE total
72
572
5.6x
6.2x
6.0x
7.2x
14.0x
77
35
6.0x
PE average
8.5x
5.2x
30
6.5x
5.7x
6.2x
2008
n.a.
59
6.2x
6.5x
78
2
1,161
904
PE : plc
Transactions
Ratio
1 : 5.7
Listed corporate average
147
Listed corporate total
3,240
7.8x
4.9x
n.a.
8.6x
8.2x
6.2x
6.0x
6.5x
6.5x
15
Source: Mergermarket, DC Advisory
intelligence