Growth Capital Partners

IMPROVED ENVIRONMENT FOR STAFFING M&A ACTIVITY EXPECTED IN 2010
Growth Capital Partners Reports 68 Staffing Transactions in 2009

HOUSTON, TX, January 6, 2010 – Growth Capital Partners reported today that 16 staffing transactions, completed by 15 different buyers, were publicly announced in the fourth quarter of 2009. For all of 2009, 68 staffing transactions were announced by 55 unique buyers. The 68 transactions completed in 2009 represent the lowest number of transactions completed in the staffing sector since the early 1990s and was a direct result of the poor financial performance of most staffing-related businesses during the past twelve months. With a renewed outlook for staffing industry growth in 2010, strategic buyers are increasingly ramping up their acquisition plans and seeking good quality companies to acquire. As many sellers should have substantially improved earnings in 2010 and with buyers increasingly willing to offer stronger valuations with better terms, the coming year is expected provide a much improved staffing M&A environment and the number of completed transactions should return to historically normative levels.

Commercial staffing businesses accounted for 5 of the 16 transactions this quarter and led the activity in 2009 with 20 deals completed. Commercial staffing businesses, including light industrial and administrative staffing companies, were especially hard hit during this recession and many of these transactions involved companies in a “must sell” situation. IT staffing companies also produced 5 deals this quarter and accounted for 14 transactions in 2009. We have been contacted recently by several buyers in the IT staffing sector who are aggressively seeking acquisitions and we believe this segment will show the most improvement in M&A activity in 2010. IT staffing businesses showing healthy revenue growth, strong gross margins and possessing direct end-client relationships are currently generating substantial interest from buyers and this demand should only strengthen as 2010 progresses.

“While completed staffing deal activity reached record lows in 2009, buyer interest substantially picked up as the year concluded and many active buyers lamented the absence of quality staffing companies available for acquisition,” commented John Niehaus, Director of Staffing Industry M&A Services for Growth Capital Partners. “We expect to see a steady increase in staffing deal flow as 2010 progresses, with many potential sellers who deferred transactions in 2009 going to market in 2010 to take advantage of the still low capital gains tax rates and achieve personal liquidity. These sellers will find a surprising high number of interested strategic buyers if they look outside of the usual list of acquirers.”

Among the notable deals announced in the fourth quarter of 2009, Adecco SA, the world’s largest staffing firm, agreed to acquire publicly traded MPS Group for $1.3 billion to further expand its presence in the professional staffing sector; Global Employment Solutions was taken private as the company announced its sale to private equity group Victory Park Capital; and Employbridge Holding Company, a $400 million provider of commercial staffing services, announced that the company had been acquired by MSouth Equity Partners, a private equity group who’s predecessor, CGW Southeast Partners, had owned Employbridge from 2000 to 2006.

Founded in 1992, GCP is an investment and merchant banking firm that provides financial advisory services to both private and public middle-market companies, with a specialty practice devoted specifically to the Human Capital Services industry. GCP also focuses extensively on the private equity marketplace. Since its inception, GCP has completed in excess of 250 transactions, raised more than $1 billion of institutional capital (through private placements of equity, subordinated, and senior debt), and completed M&A transactions with an aggregate value in excess of $4 billion.

For more information on Growth Capital Partners’ services, including its specialty M&A practice for Staffing,
IT Consulting and Human Resource Outsourcing companies,
please contact John Niehaus at jniehaus@growth-capital.com
or visit our website at www.growth-capital.com.