Michael Page To Consider Offers From 2Billion Says CEO?
Michael Page To Consider Offers From £2Billion Says CEO?
In an interview with Swiss newspaper, Finanz und Wirtschaft, Steve Ingham, CEO of Michael Page says a potential acquisition would be considered.
* Interview by Eric Bürgler, translated from German.
Mr. Ingham, Michael Page provides bankers in the major financial centers worldwide. How hard is this business in a time of debt crisis?
This part of our business is currently very hard. In London, some of the largest banks, which are also our most important customers, imposed a hiring freeze. Generally in the industry, the willingness of employees to change jobs, and the motivation of banks to hire staff is low. It looks better in Asia, where developments affecting the financial industry in the major centers stable.
Are the banks moving a lot of jobs from Europe to Asia?
Yes, this trend we see. Given the improved economic scenario in Asia, it makes sense to hire people. Whether this simply reflects the current economic environment, or a strategic long-term repositioning means the financial industry, is hard to say.
And the competition among Western financial centers?Swiss bankers are threatening massive job cuts. Banks make threatening gestures in different countries, to influence governments and to create good conditions. I do not know if these threats are also made true really.
Banks have an image problem as an employer?
To a certain extent already. I am sure that it considers the graduates to experienced managers a lot more before they apply for a bank. The idea, thanks to a position within the industry to get rich quick, it must be questioned in any case.
What are your expectations for the banking sector?
One thing I've learned during 25 years with Michael Page: The sector tends to be much faster to recover from a downturn than other sectors. Thus, in the financial crisis as early as 2010, twelve months after the layoffs, accountants were in great demand. If it goes up again with the economy, the banks are understaffed and have a lot of frustrated people change their place. The industry will recover at some point, and quickly. The pain phase lasts for the time being, however, still ongoing.
About half of the gross earnings from Michael Page comes from the finance and accounting. How many banks are still at it?
We currently earn about 8% of our gross profits to banks, the rest of the professionals from the finance we provide in other industries. Increasingly important are engineering, construction and logistics, where they come from 19% of our business. This segment is growing annually by about 20%. In emerging countries like China and Brazil, especially when such people are much sought after international corporations.
In Asia the company is generating above-average margins. Is that also true for China?
In China, the margins are as high as in other Asian countries. For staff who speaks English and Mandarin and is familiar with both cultures, the demand is very high, the offer, however low. Accordingly, high wages are paid. We have doubled our staff in China last year. The potential is enormous. Last time I was in Beijing, seeking one of our customers as quickly as possible to 400 accountants at once.
The placement of professionals is a lucrative segment, also penetrate into the large staffing company through acquisitions. Increases the competition?
The big-time companies, we feel really at all, quite the contrary. The MPS purchased by Adecco operates the brand in the UK Badenoch & Clark. They were before the takeover was a very significant competitor of us, now we take it any more. Randstad has bought a few years ago Martin Ward Anderson, a direct competitor that made us into serious trouble. This is no longer the case.
The business operates completely differently than permanent employees with temporary workers. It takes a completely different types of consultants, and must be in accordance with specific wage models that are based not just on a commission per placement.
Who are the competitors?
Often it is the personnel departments of companies that make everything ourselves, especially in emerging countries. In parts of China, there are hardly any other segment of our recruiters. The concept is still poorly understood. In developed countries, we stand with thousands of small businesses in the competition, which consist of a few consultants.
Michael Page could do with acquisitions contributing to a consolidation.
Michael Page has never done since the founding of a takeover, and I do not expect that we will do so in the future. I've seen no evidence that acquisitions are an effective means for our business growth. The risk to take on a mediator from detecting is high. You start each month with a turnover of zero. Leave the consultants, the company purchased, nothing remains. We also know nothing about acquisitions because we have no experience of it. Also in our key growth markets such as Asia and Latin America hardly interesting companies to buy.
And in North America?There, employs only 200 Michael Page consultants.
The business models of existing agents differ from ours. Acquisitions are also there is no shortcut on the way to faster growth. The largest house call for us in the U.S. come to consultants with specialized knowledge. Our name is hardly known, and service personnel have a good reputation. We have overcome these problems but also in other countries. This, however, takes time.
Adecco was four years ago, interested in the purchase of Michael Page. Management and the Board refused. Why?
The question is: Why should we accept? How do we benefit from it, how we should grow more rapidly within a large corporation? Adecco we could answer these questions at that time. We were after 1997, three years part of the U.S. company Spherion, and it brought us no benefits.
If the price is right for an offer that would be for Michael Page shareholders may enticing.
Then we need to assess the situation again. But I doubt very much that it will happen. Today we have a market capitalization of approximately £ 1.3 billion. If the premium is to be offered as the last time about 70%, an offer of well over £ 2 billion would be needed, and that's a lot of money for a recruiter because of the risk that experienced consultants jump.
Experienced consultants will determine the success of the company. How does that fit to the dismissal of more than one third of employees in the last recession?
We have in previous years, increased staff significantly. It was a part of these employees who had to leave because of job cuts. Experienced consultants, but also new services being who could prove a challenging environment, have remained with us. Only in a downturn we will see who makes above average, or as Warren Buffett said: When the tide comes, you can see who is swimming naked.
The gross profit of Michael Page in the first quarter 2012 increased by 8% in constant currency. What brings the full year?
From today's perspective, I expect the full year, a similar growth rate. Given the difficult environment in markets such as Spain, Italy and Great Britain and the sluggish business with financial institutions, I personally do not expect a fantastic year. Analysts on average expected operating profit of approximately £75 million for 2012. I do not comment on that, but if it would disturb me, I'd have to say something about it.