The Adecco Group acquires General Assembly
The Adecco Group has entered a definitive agreement to acquire General Assembly, a company focused on education and career transformation that offers accelerated learning programs in high-demand 21st-century digital skills. Total enterprise value is USD 412.5 million (EUR 335 million) and the transaction is expected to be EVA positive in the third full year of ownership.
Alain Dehaze, CEO of the Adecco Group, commented, “Our clients are looking for partners to improve access to scarce 21st-century skills and help navigate workforce transformation. Demand for digital skills is growing but supply remains constrained. The rise of automation also creates a critical need to re-skill workers, with as many as 375 million employees globally needing to transition to new roles by 2030. By offering General Assembly’s services alongside the Group’s existing talent development, career transition and professional staffing solutions we will be able to better respond to these client needs, enhancing both access to and the supply of the most in-demand skills. We look forward to working with the General Assembly team to build a dynamic and unique business together.”
General Assembly provides digital skills training for individuals and corporations. Founded in 2011, the company offers employer-focused, practitioner-taught technical skills training and development in business-critical areas such as coding, data science, user experience design and digital marketing. Its full-time immersive and part-time courses are delivered by expert instructors across an international network of 20 campuses, at enterprise client sites, online or via a blended model. Its award-winning curriculums have proven highly effective at delivering specific skills and enhancing career paths, achieving significantly higher engagement and completion rates than online-only training. The company’s strong brand position is supported by high customer satisfaction (NPS 50+) and excellent career outcomes for its more than 50,000 global alumni.
General Assembly has a strong track record of organic revenue growth, achieving a three-year CAGR of 30%. Revenues in 2017 were approximately USD 100 million and the company has a strong backlog of bookings for 2018. General Assembly’s business model is highly scalable, with programme content delivered via an omni-channel approach (classroom, online and blended). Access to the Adecco Group’s more than 100,000 enterprise clients, global infrastructure, data and comprehensive labour market knowledge will further enhance General Assembly’s strong standalone growth potential, with specific opportunities already identified.
Significant synergies exist with the Adecco Group’s current solutions portfolio. In particular, leveraging General Assembly’s complementary training services to enhance the value proposition of Lee Hecht Harrison’s career transition and talent development solutions will further broaden the Group’s workforce transformation capabilities. By helping organisations to up-skill their current talent and transition them into new technology-powered roles, clients can reduce the financial and personal costs associated with disruptions to the workforce caused by rapid changes in technology. There is further significant potential to leverage General Assembly’s "Talent Pipeline as a Service" (TPaaS) model in professional staffing & solutions. TPaaS sources, trains, and delivers skilled workers to enterprises, enabling employers to close large and often persistent gaps for qualified talent. As part of the broad suite of training and workforce solutions offered by the Adecco Group, TPaaS can create pools of highly-skilled tech talent for clients around the globe.
The acquisition of General Assembly strengthens the Transform and Innovate pillars of the Adecco Group’s strategic agenda and is consistent with the Group’s strategy to expand into high-growth, high-margin adjacent markets. As the Group transforms its core operations and broadens its solutions portfolio this will accelerate its structural revenue growth and enhance margins, while continuing to deliver strong cash flow, all underpinning its commitment to achieve leading total shareholder returns.
General Assembly will continue to operate as a separate division within the Adecco Group under the leadership of founder and CEO, Jake Schwartz, and his team, reporting to Sergio Picarelli, member of the executive committee of the Adecco Group.
Schwartz said, “General Assembly has always been about creating bridges between education and employment - that’s what has allowed us to scale to 20 campuses, 50,000 alumni, and over 300 Fortune 500 clients. As our work with employers has grown, so has our need to connect in a deeper way with the world of human capital, and that is why we are so excited about the transformational opportunities that come with this partnership.
“We chose the Adecco Group because it brings a multitude of strategic opportunities to serve enterprise clients, solve pervasive digital skills gaps, and align our offerings with the world-class brands that comprise the Adecco Group network.”
Under the terms of the agreement, the enterprise value of General Assembly amounts to USD 412.5 million (EUR 335 million). For 2018, General Assembly is on track to achieve strong double-digit organic revenue growth. General Assembly is currently in a high-growth investment phase and is therefore expected to be modestly dilutive to Group earnings in 2018, the impact of which is included within the Group’s current guidance on planned strategic investments. From 2019, General Assembly is expected to be modestly accretive to earnings. In the medium-term General Assembly’s EBITA margins are anticipated to be significantly higher than the Group average. The acquisition is expected to be EVA positive within three years, in-line with the Group’s M&A criteria, and will create substantial long-term value for shareholders.
The transaction will be financed from the Group’s existing financing resources and is subject to customary closing conditions, including certain regulatory approvals. It is expected to close during Q2 2018.
The acquisition of General Assembly and Vettery, in early 2018, continue the strategic development of the Adecco Group, consistent with the priorities laid out at the September 2017 Capital Markets Day. Combined with the organic development of Adia and YOSS, in 2017, the Adecco Group’s solutions portfolio has been expanded to include leading platforms in online staffing, freelance, digital permanent recruitment and up-/re-skilling. Focus will now be on the successful integration and acceleration of these acquisitions and ventures, and the Group therefore does not anticipate further significant M&A during 2018.
The Group’s balance sheet remains strong. Net Debt/EBITDA excluding one-offs at year-end 2017 was 0.8x, or approximately 1.1x on a pro-forma basis, including the acquisitions of General Assembly and Vettery. The Group announced a EUR 150 million share buyback with the Q4 & FY 2017 results. Purchases under the share buyback are expected to be focused in Q4 2018 and early 2019, due to the seasonality of Group free cash flow, which is typically stronger in H2, and outflows relating to the dividend and M&A in H1 2018.
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