Private equity and the recruitment sector
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Private equity and the recruitment sector. Contents. Inflexion overview Why we like recruitment and staffing businesses Learning points from our deals Making your company attractive to private equity Valuation metrics. Inflexion Overview. An entrepreneurial and highly active investor

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Private equity and the recruitment sector

Private equity and the recruitment sector


Contents

Contents

Inflexion overview

Why we like recruitment and staffing businesses

Learning points from our deals

Making your company attractive to private equity

Valuation metrics


Inflexion overview

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


Strong international footprint and offices in brazil india china

Strong international footprint and offices in Brazil, India & China

FDM

Griffin

Phlexglobal

NPW

Asperity

Rhead

SMD

CTC Aviation Group

Ideal Shopping Direct

Trading locations of ex portfolio

Jack Wills

Aspen distributes to 70 countries


History of success in recruitment and staffing

History of success in recruitment and staffing

7 years, 4 investments and a deep understanding of industry dynamics

Specialist employment service

Specialist IT graduate

recruitment

Specialist healthcare

recruitment

Specialist SAP

recruitment

2006 +

2010 +

2008 - 2010

2005 - 2011

ESTIMATED TOTAL

INDIVIDUAL AVERAGE

5


Private equity and the recruitment sector

Why we like recruitment and staffing businesses

Able to dominate a niche/control scarce resource

Capable of rapid growth

International potential

Low capex, operationally geared


Private equity and the recruitment sector

The common characteristics of our success stories

Dominant market position/control of scarce resource

Solving a problem

Margins more important than volume

Scalable structures

Most of operations on a single site

Strong management

Focus on the exit from Day 1


The common development areas in our deals

The common development areas in our deals


Learning points from our deals

Learning points from our deals


Independent clinical services

Independent Clinical Services

Business overview

  • Leading provider of temporary healthcare staff including nurses, community care workers, locum doctors, GPs and other healthcare specialists

  • Specialism in mission critical staff such as anaesthetists, surgical nurses and support staff

  • Had new Complex care in the home division, growing at 40% pa

  • Key learning points

  • Strength through adversity

  • Scalability protects margin

  • Strong focus on customer service

  • Growth and quality enhancement

  • Well positioned for exit

EXIT ROUTE

Sold to Blackstone Group

RETURNS

2.7x / IRR 82% in 22 months

Development under our ownership

  • Pre acquisition

  • Pursued several acquisitions

  • Improved quality of earnings

  • IFX invests at c.4.2x EBITDA

  • Continued geographical reach expansion

  • Investment in Complex Care

  • Exit to Blackstone achieved at 7.6x EBITDA

ON EXIT

EBITDA (£M)

Year end Dec


Red commerce

Red Commerce

EXIT ROUTE

Sold to Dunedin Capital Partners

RETURNS

4.4x / IRR 34% in 5 years

Business overview

  • Leading supplier of temporary and permanent staff for global SAP implementations

  • 80% of the business is in German- speaking Europe

    Key learning points

  • Dominate the niche

  • Control pricing and drive expansion

  • Expand service line

  • Great team delivers great results

Development under our ownership

  • Appointed new Chairman

  • Appointed new FD

  • Pre acquisition

  • Invested in Business Development Function

  • New CRM system installed

  • Promoted Sales Director to CEO

  • Extended into Central Europe

  • US market entry

  • Launched ‘Red Solution’ service

ON EXIT

(BUDGET)

EBITDA (£M)

Year end March


Fdm group

FDM Group

SECTOR

IT Services

DATE

February 2010

HISTORIC EBITDA

£16.8m

DEAL TYPE

Public-to-Private

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

  • Key learning points

  • Unique offering drives super-performance

  • Massively scalable

  • Incentivisation drives performance

Development under our ownership

  • New Hong Kong office opened

  • Pre acquisition

  • Consultants numbers for 2010 62% ahead of management plan

  • New York based training Academy opened in July 2010

  • Reviewing Academy apprentice in Europe

  • Targeting to achieve1,300 consultants (338 at investment in Dec 2009)

BUDGET

EBITDA (£M)

Year end Dec


Private equity and the recruitment sector

How to optimise the attractiveness of your company to private equity

  • 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

  • Solving a problem

    • Demonstrate you are the “go-to” choice for employers and candidates, not an outbound call centre

  • 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

  • Scalable structures

    • Single sites

    • Strong IT

    • Interviewers on per hour basis

  • Strong management

    • Staffing businesses are highly morale and leadership dependent

    • Fix any gaps or issues early – instil confidence in the buyer


Private equity and the recruitment sector

EV / 2013F EBITDA

Quoted company valuations

Medium sized players trade at a premium compared to the smallest tier…

We observe more diversity in majors’ ratings – but overall they benefit from higher ratings

The smallest listed players are rated the lowest…

Power trend line

Source: Mergermarket, DC Advisory intelligence


Recent transaction multiples

Recent transaction multiples

PE

Corporate

Acquiror

Target

Acquiror

EV (£m)

EV (£m)

EV/EBITDA

Target

EV/EBITDA

2012

100

75

234

10x

2011

44

132

437

n.d.

26

16

55

2010

75

3

5

Orion

11

110

2

8

4

110

5

2009

Peter Rowley

25

2

1,161

904

30

59

2008

30

78

77

35

175

18

PE average

72

147

Listed corporate average

PE : plc

Transactions

Ratio

1 : 5.7

572

3,240

PE total

Listed corporate total

Source: Mergermarket, DC Advisory intelligence


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