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On Assignment to Acquire Apex Systems

On Assignment to Acquire Apex Systems

Transaction Creates the Second Largest IT Staffing Firm in the United States and Further Positions On Assignment in the Most Attractive and Fastest-Growing Segments of the Professional Staffing Industry

Transaction is Expected to be Significantly Accretive to On Assignment EPS

On Assignment, Inc.has announced that it has signed a definitive agreement to acquire Apex Systems Inc., a leading information technology staffing and services firm. The transaction will create one of the largest professional staffing firms and the 2nd largest IT staffing firm in the United States. The acquisition is expected to be significantly accretive to On Assignment's earnings per share, on both a GAAP and cash EPS basis, in 2012 and beyond. On a pro forma basis, 2011 revenue of the combined entity was $1.3 billion.

Privately-held Apex Systems is the 6th largest and one of the fastest growing IT staffing firms in the United States. In 2011, Apex Systems had approximately $700 million in revenue and adjusted EBITDA of approximately $65 million. Apex Systems has achieved a compound annual revenue growth rate (CAGR) of 30.4% since 2000 and expects to achieve double-digit top-line growth in 2012.

"Apex Systems becoming part of On Assignment further positions us in the most attractive and fastest-growing segments of the staffing industry," said Peter T. Dameris, president and chief executive officer of On Assignment, Inc. "Apex Systems' IT staffing services are complementary to those offered by our existing technology division, Oxford Global Resources. Because the offerings do not compete, the acquisition will create value for our clients, shareholders and employees by expanding our presence in the IT staffing market. The transaction also achieves On Assignment's five-year strategic plan to reach $1 billion in annual revenue three years ahead of schedule.

"Apex Systems has an impressive track record of consistent revenue growth and strong margins. The company's numerous achievements and accolades are a direct result of its talented leadership team, dedicated employees and their ability to set aggressive goals and execute accordingly," Dameris added. "This transaction did not take place overnight. It is the result of years of discussions and analysis to ensure it came together in the right way, at the right time and was the right fit. As a result, integrating Apex Systems with On Assignment should be a seamless process and will permit our companies to remain focused on serving our clients and growing our business."

Acquisition Creates a More Diversified and Faster Growing Staffing Firm

The acquisition uniquely positions On Assignment to provide a broader spectrum of IT staffing offerings, from mission critical daily IT services to high-end specialty projects.

"We are thrilled to join forces with On Assignment. As one of the largest and most respected professional staffing firms in North America, On Assignment's success is a testament to its strategic vision, disciplined management, consistent growth and operating profitability," said Win Sheridan, co-founder and co-CEO of Apex Systems.

"We believe the transaction will open the door to new opportunities for our employees as they join a combined platform with greater public visibility, increased financial firepower and the ability to offer an even broader array of services for our clients. Furthermore, the absence of sales channel conflict enables us to continue to focus on aggressively driving top-line growth. We want to thank our employees whose hard work and dedication have allowed us to become one of the most recognized and trusted IT staffing firms in the market," said Jeff Veatch, co- founder and co-CEO of Apex Systems.

Apex Systems will continue to operate substantially as it has in the past. The company's three co-founders will continue to focus on Apex Systems' strategy and its high-performance culture as they have done for the last three years, and will also have representation on the On Assignment board of directors. Rand Blazer and Ted Hanson, Apex Systems' chief operating officer and chief financial officer, respectively, and the rest of the senior management team will remain in place and continue to oversee the day-to-day operations of the business.

"This transaction is expected to be immediately accretive to earnings per share (without any synergy savings) and generate strong cash flow," Dameris said. "We look forward to working closely with the talented team at Apex Systems to take advantage of the many growth opportunities this transaction will bring."

Transaction Details

Under the terms of the definitive agreement, On Assignment will acquire all of Apex Systems' equity and retire all of its debt, for a total of $600 million. The purchase price is comprised of $383 million in cash, and newly-issued stock valued at $217 million. The transaction is expected to be accretive on both a pro forma GAAP and cash EPS basis in 2012 and beyond, excluding transaction-related costs.

In connection with the execution of the definitive agreement, On Assignment obtained a commitment for a new $540 million senior secured credit facility from Wells Fargo Bank, N.A., Bank of America Merrill Lynch and Deutsche Bank Trust Company Americas. The credit facility provides for a $50 million revolving credit facility and $490 million term loan. The proceeds of the term loan will be used to finance the cash portion of the purchase price, to repay existing indebtedness of On Assignment and Apex Systems and to pay fees and expenses in connection with the transaction.

Upon closing of the transaction, funded debt of the combined company will total approximately 3.75x estimated pro forma adjusted EBITDA (as defined below) for the twelve months ended March 31, 2012. On Assignment will benefit from having the acquisition treated as an asset sale under section 338(h)(10) of the IRS code. The election is expected to result in an estimated $14 million of annual cash tax saving over the next 15 years. On Assignment expects its increased scale, along with strong revenue and free cash flow generation, to result in rapid deleveraging, creating further equity value. In connection with the acquisition, On Assignment intends to make grants of restricted stock units covering the Company's common stock to certain employees of Apex Systems as employment inducement awards pursuant to the NASDAQ rules.

The acquisition, which was approved by the Boards of Directors of both companies, remains subject to approval by On Assignment's shareholders, required regulatory approvals as well as other customary closing conditions. The transaction is expected to close in May 2012.

Legal and Financial Advisors

On Assignmentretained Latham & Watkins LLP as legal counsel and Moelis & Company as exclusive financial advisor. Apex Systems retained Troutman Sanders LLP as legal counsel and Wells Fargo Securities as exclusive financial advisor.

Financial Estimates for the Second Half of 2012

Taking the transaction into account as well as the Company's normal seasonal operating patterns, the Company's financial estimates for the second half of 2012 are as follows:

Revenues of $775 million to $805 million

Gross margin of approximately 30% to 31%

SG&A of approximately $167 million to $178 million1

Adjusted EBITDA as a percentage of revenue of 10% to 11%1 2

Tax rate of 41% to 41.5%

GAAP earnings per share of $0.50 to $0.601

Cash earnings per share of $0.77 to $0.881 2 3

Fully diluted shares outstanding of 54,385,000



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