Growth Capital Partners

Staffing M&A Activity Continues as Buyers Become Increasingly Selective

Growth Capital Partners Reports 54 Transactions in the First Six Months of 2008

HOUSTON, TX, July 7, 2008 – Growth Capital Partners reported today that 23 staffing-related businesses were sold or merged in the second quarter of 2008. For the first six months of 2008, 54 transactions have been reported. The 23 staffing transactions recorded this quarter marks the lowest number of announced transactions since the fourth quarter of 2001. Even so, staffing M&A discussions remain extremely active with many potential sellers testing the market and most buyers reviewing multiple transaction opportunities. The decline in completed transactions largely reflects the current disconnect between sellers’ pricing expectations and the buyers’ views of the market. Acquirers are typically citing lower public company valuations, slower growth expectations, and reduced access to cheap debt financing as support for their view of the market.

Professional staffing companies continue to see the broadest interest from potential buyers and still account for the vast majority of M&A activity, as 92% of the announced transactions in the second quarter of 2008 involved these specialty staffing firms. Healthcare staffing continues to lead the M&A activity, as 5 healthcare staffing transactions were completed in the second quarter. Within the healthcare sector, locum tenens and allied healthcare continue to be the most sought after staffing disciplines. Within the IT staffing space, companies having either significant scale or very strong gross margins are driving buyer interest, as 3 transactions were reported in the quarter. Buyers also continue to report a strong interest in acquiring both leading finance & accounting and legal staffing companies. Finally, M&A activity for commercial staffing businesses slowed considerably as only 2 transactions were announced in the quarter. In the commercial staffing sector, targeted geographic acquisitions or larger platform light industrial or administrative staffing companies that are still showing revenue growth and generating above average gross and EBITDA margins are the most sought after.

“Many staffing company owners are currently exploring their transaction alternatives due to a combination of slowing growth, an uncertain economic outlook, and fear of a future capital gains tax hike,” commented John Niehaus, Director of Staffing M&A Services for Growth Capital Partners. “Valuations and transaction terms remain healthy for the larger or market leading independent professional staffing companies, especially those with strong growth stories and above average margins. However, valuations drop off quickly for businesses that are not growing or that have not distinguished themselves from their competitors. Today’s buyers have become increasingly selective.”

Among the notable deals announced in the second quarter of 2008, Resources On Call, a leading provider of allied healthcare personnel, was acquired by Nursefinders; Personnel Management Inc., a light industrial staffing company owned by Linsalata Capital Partners, was acquired by True Blue, Inc.; MPS Group’s Soliant Health division acquired RPh on the Go, one of the nation’s leading pharmacy staffing companies; HireSynergy, a Houston-based provider of finance and accounting personnel, was acquired by Addison Professional Search; and Kforce announced that it had sold its scientific staffing division to Aerotek Scientific.

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 M&A practice for Staffing, IT Consulting and HRO companies, please contact John Niehaus at jniehaus@growth-capital.com or visit our website at www.growth-capital.com.

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