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Osborne Clarke advises on two staffing company acquisitions in Germany

Osborne Clarke advises on two staffing company acquisitions in Germany

Osborne Clarke has recently advised on three deals with something interesting in common.

It advised Geometric Global Ltd (a leading Indian engineering company) on the acquisition of Munich based 3 Cap Technologies (technical recruitment company).

It also advised on the acquisition by Allgeier (a leading German IT company) of leading German IT staffing company tecops personal GmbH. Allgeier has announced that tecops will become part of the Allgeier “Experts Division”.

Earlier (Summer 2012) it advised outsourcing company Mitie on its acquisition of a UK care staffing business (Enara) for &pound110M.

What makes these deals interesting is the type of buyer involved. There is little current interest in IPO's in the recruitment sector. Therefore in recent history buyers and investors have mainly been either private equity investors or trade buyers from within the recruitment sector (especially US trade buyers looking to grow their global footprint in response to hirer demand for global RPO/MSP partners). But these three recent deals suggest that there is growing interest from another type of potential buyer/investor, in the form of "solutions" or outsourcing companies. And it was not just these three deals. In 2012 Osborne Clarke advised on 10 completed M&A transactions in the recruitment sector, and another 10 which went a good way to completion but, for various reasons, did not finish. 35% of these deals involved actual or proposed investments/acquisitions by services or solutions companies (e.g. technology businesses), or general outsourcing companies, rather than by other recruitment companies or private equity companies.

Why is this happening? One factor might be that, for various reasons, many specialist staffing companies now target "defined deliverable" or "statement of work" ("SOW") assignments. That is certainly a big theme in the US as staffing companies try to find additional, higher margin, work from "consultancies" who often do very little more than find a consultant and place him or her at the client. In the UK and Europe SOW assignments have the additional benefit of offering significant tax and VAT efficiencies, and can help avoid some employment liabilities and regulatory problems. As a result some staffing companies are becoming hybrid creatures – depending on who asks, they can call themselves either staffing or consultancy/solutions businesses.

And that in turn now seems to be fuelling enthusiasm about apparent synergies between solutions companies and technology staffing companies. It seems that solutions companies can in some cases see market opportunities in offering technology solutions alongside staffing. We are also seeing a trend towards outsourcing and support sector companies buying staffing businesses (such as Mitie's acquisition of Enara), with some well-established players in the healthcare staffing market offering a mix of staffing and solutions. At the same time there are signs of outsourcing companies buying professional staffing companies, with highly-regarded companies like Steria and Capita having, for some time, operated staffing alongside their outsourcing and solutions businesses.

Reflecting this, January 2013 has seen Osborne Clarke start advising on five new deals involving outsourcing and solutions companies bidding for staffing companies.

Many industry veterans may consider that it is not always a good idea for staffing companies to try to offer solutions and vice versa - different mindsets and internal controls are required and cultural differences may make such deals unsuccessful (if not disastrous) in the long run. However, these deals will often make a lot of sense, and so the current trend may lead to additional exit opportunities for owners of recruitment company, which is surely reason for some cheer! 

So, what is the learning point? These recent deals suggest that, if you want to sell a recruitment company, it may be worth thinking about what it needs to look like to attract one of these newer types of buyer.

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