STAFFING M&A TRANSACTIONS DECREASE DESPITE FAVORABLE CONDITIONS FOR SELLERS

HOUSTON, October 4, 2006/PR/ - Growth Capital Partners reported today that 33 staffing businesses were sold or merged in the third quarter of 2006, as compared to 39 transactions announced in the second quarter of 2006.  For the first nine months of 2006, 104 transactions have been publicly announced.  Favorable M&A conditions persist for both buyers and sellers, as the staffing industry continues to perform well, especially in many of the specialty staffing niches.  While many companies appear to be engaging in an increasing number of conversations regarding acquisitions, the number of announced completed transactions continues to lag behind these growing “behind-the-scenes” conversations.

Professional staffing companies, including those in the IT services, engineering/technical, healthcare, finance/accounting, and legal staffing industries, continue to be the most attractive targets for buyers as 79% of the announced transactions in the third quarter involved professional staffing firms.  Within the professional staffing sector, IT services companies, consisting of both IT staffing and IT solutions firms, saw the most M&A activity with 9 announced transactions in the third quarter and 29 year to date.  On the commercial staffing side, prices paid by buyers are typically less than for similarly sized professional staffing companies resulting in fewer deals being completed as 7 transactions were announced in the third quarter and 23 year to date.

“Conditions continue to be favorable for owners considering a sale of their staffing business, especially for companies within the professional staffing niches,” commented John Niehaus, Director of Staffing Services and Human Capital Management for Growth Capital Partners.  “This window of opportunity should continue as long as customer demand for staffing services remains strong. The industry is poised for another year of near double digit growth provided the domestic economy does not experience a hard landing due to rising interest rates.”

“Despite these currently favorable conditions and the increasing number of M&A conversations, the number of completed staffing transactions has yet to increase to the extent anticipated by many industry observers.  Only a select group of strategic buyers and private equity firms are currently paying multiples at the top end of the range and some sellers continue to cling to unrealistic pricing expectations,” continued Mr. Niehaus.  “However, excellent exit opportunities continue to exist and staffing company owners should stay informed as to who the most aggressive buyers are and the types of businesses they are seeking to acquire.” 

Among the notable deals announced in the third quarter of 2006, Cross Country Healthcare acquired Metropolitan Research Staffing Associates, a provider of clinical trials staffing, drug safety monitoring and contract research services to the pharmaceutical and biotech industries; Kenda Systems, was acquired by Segula Technologies, a French engineering, consulting and information technology provider, to serve as its platform for technology staffing in the United States; Hudson Highland Group completed the sale of its Highland Partners Executive Search business to Heidrick & Struggles; Employbridge Holding Co., a commercial staffing company owned by private equity group CGW Southeast Partners, was sold to J.W. Childs Associates, a Boston private equity group; and Bradson Corporation, a finance and accounting professional services firm serving the federal government, was acquired by Kforce.

Growth Capital Partners, L.P. is a premier, client-focused investment and merchant bank serving both private and public middle-market companies, with a specialty practice devoted to the Staffing industry. Since the firm's inception in 1992, GCP has completed in excess of 200 transactions, raised more than $1 billion of institutional capital (through private placements of equity, subordinated, and senior debt), and completed merger and acquisition transactions with an aggregate value in excess of $3.0 billion. 

For more information on Growth Capital Partners’ services, including its specialty practice for Staffing, IT Services and HRO companies, please contact John Niehaus at jniehaus@growth-capital.com.

Source:  Growth Capital Partners, L.P. member FINRA – SIPC

Growth Capital Partners, L.P. Securities offered through GCP Securities, Inc. member FINRA – SIPC

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