Growth Capital Partners

STAFFING M&A ACTIVITY IMPROVES
AS TEMPORARY STAFFING SHOWS SIGNS OF RECOVERY
Growth Capital Partners Reports 20 Transactions in the First Quarter of 2010

HOUSTON, TX, April 7, 2010 – Growth Capital Partners reported today that 20 staffing transactions, completed by 18 different buyers, were publicly announced in the first quarter of 2010. This is the second consecutive quarter of increasing staffing M&A activity and this upward trend is expected to continue through the next several quarters. As the temporary staffing sector recovery continues, an increasing number of buyers are indicating an interest in acquisitions to supplement their growth objectives, with valuation pricing inevitably the primary challenge during most transaction discussions. Because profitability results in the industry have been anemic over the past several quarters, seller interest is primarily still coming from company owners who are strongly motivated to complete a transaction; either due to excessive debt problems, life events such as retirement or divorce, or an irreversible decline in the performance of their businesses. As earnings improve, more sellers will enter the market as they become better able to attain their asking prices.

Commercial staffing businesses, including light industrial and administrative staffing, accounted for 7 of the 20 transactions in the first quarter of 2010. Light industrial staffing businesses should be among the first to show substantially better earnings in 2010 and acquisition activity should continue to improve in this sector as revenue and profitability growth return. IT staffing companies produced 5 deals in the quarter, with those IT staffing businesses showing healthy revenue growth, strong gross margins and possessing direct end-client relationships generating the most interest from buyers. Healthcare staffing also accounted for 5 transactions in the quarter, as buyers are aggressively pursuing strong allied healthcare and locum tenens companies while opportunistically evaluating nurse staffing businesses.

“Buyers continue to outnumber sellers in the staffing M&A marketplace, as growth returns to the industry and buyers with access to capital seek ways to strategically grow their businesses,” commented John Niehaus, Director of Staffing Industry M&A Services for Growth Capital Partners. “While we do not forecast valuation multiples to rise appreciably in 2010, we do expect a better flow of sellers to enter the market later this year, as earnings improve and sellers are better able to reach their pricing objectives. Higher capital gains tax rates beginning in 2011 may also spur some year-end transaction activity.”

Among the notable deals announced in the first quarter of 2010, Manpower agreed to acquire publicly traded Comsys IT Partners for approximately $414 million to further expand its presence in the IT staffing sector; Spherion Corporation acquired Tatum LLC, a leading financial executive services firm focused on the office of the chief financial officer; Emerald Health Services acquired New Orleans-based American Nursing Services, a healthcare staffing business previously owned by private equity group Liberty Partners; Jackson Healthcare purchased Hire Dynamics Rx, the pharmacy staffing division of Duluth, GA-based Hire Dynamics LLC; and Medical Connections Holdings, Inc. announced its intention to acquire Trustaff Management, a Cincinnati-based provider of travel nursing, allied healthcare and physician staffing services with 2009 revenue of approximately $42 million.

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.