Capstone Partners. Staffing & Talent Management. Market Intelligence for Business Owners Q Coverage Report. Investment Banking Advisors

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1 Coverage Report Market Intelligence for Business Owners Q Capstone Partners Investment Banking Advisors BOSTON CHICAGO LOS ANGELES PHILADELPHIA SAN DIEGO SILICON VALLEY

2 Coverage Report MERGER AND ACQUISITION ACTIVITY: 2012 REVIEW CAPSTONE PARTNERS LLC 176 Federal Street 3 rd Floor Boston, MA John Ferrara Founder, President (617) jferrara@capstonellc.com The staffing industry experienced a very active M&A atmosphere in 2012, reflective of an improving economy and a healthy operating environment for many staffing businesses. Capstone s research indicates that 101 transactions were completed in the industry last year, a 16% increase over the number of transactions completed in the prior year, and the third consecutive year of solid M&A performance in the sector. Most of the recent transactions targeted middle market staffing firms. There were only three mega deals recorded in the industry in 2012: On Assignment acquired Apex Systems for $600 million; Ares Management and Leonard Green & Partners acquired CHG Healthcare Services for an estimated $1.2 billion and IBM acquired Kenexa Corp. for $1.3 billion. This trend is expected to continue as the larger corporate and global players look to consolidate this highly fragmented sector. Middle market firms in the industry are proving to be attractive acquisition targets, offering geographic coverage, differentiated services, blue chip customers and talented management teams that can be immediately accretive to the acquiring organization. Daniel Schultz Vice President (617) dschultz@capstonellc.com Staffing Industry M&A Transaction Volume Sources: Capital IQ, Capstone Partners LLC research, Staffing Industry Analysts All types of staffing companies are represented in this year s transaction table on pages 3 and 4, with strong activity surrounding healthcare staffing and IT staffing firms. Light industrial staffing firms exhibited more M&A activity within the commercial staffing sector. Although corporate buyers account for the majority of transactions, both corporate and private equity buyers are active in the industry. Despite a few firms making multiple acquisitions in the industry, there were no dominant buyers, indicating a broad and diverse buyer universe for staffing companies. Meanwhile, the most active buyers in the industry over the past decade firms like Adeeco, ManpowerGroup and Ranstad did not acquire any companies in 2012 as they continued to integrate their prior acquisitions. Private equity firms outbid strategic buyers in several of the transactions. Private equity firms that made acquisitions in 2012 include GTCR, Ares Management, Leonard Green & Partners and Morgan Stanley Private Equity. These are all highly respected, very sophisticated private equity brands whose investments in the industry signify growth and opportunity. 1

3 2013 STAFFING M&A OUTLOOK Looking forward, we expect another robust year for M&A activity in the staffing industry in As the employment rate continues to improve, another wave of well performing staffing companies should emerge, resulting in another round of opportunistic sellers. The industry is estimated to be about in the middle of its current growth cycle, indicating more staffing companies should benefit from an improving environment in In addition to growth in temporary placements that immediately followed the recession, industry pundits expect more growth in permanent placements and professional staffing. As additional segments of the industry benefit from the extended economic recovery, increased M&A activity is expected to follow. Business owners are also more optimistic as the uncertainty surrounding the presidential election and tax code changes begins to subside. Although the capital gains tax rate reverted back to 20% when the Bush era tax cuts expired on January 1 st and rates are now 5% higher than in 2012, they are still low by historical standards. In the past 50 years, capital gains rates were higher in 35 of those years as compared to the current rate of 20%. 40 Capital Gains Tax Rates Sources: American Council for Capital Formation; The Tax Foundation. Rates shown are maximum individual long-term capital gains tax rates. The strong performance of the staffing industry is expected to attract buyers to the sector as there is significant capital (estimated at $350 billion) to be invested by private equity firms. International staffing firms, hoping to gain access to the attractive US market, are also expected to be active in 2013, although their ability to act may be somewhat tempered by economic woes abroad. As M&A activity improves, we expect a corresponding increase in business valuations. Multiples vary from company to company depending upon their financial success and operational advantages. 2

4 SELECTED STAFFING M&A TRANSACTIONS Date Target Acquirer Target Business Description Dec 12 Invo HealthCare Associates, Inc. Post Capital Partners Dec 12 The OCJ Group Inc. Genuent LLC Dec 12 Kenexa Corporation IBM (NYSE: IBM) Dec 12 Dec 12 Dec 12 System One Holdings, LLC Correctional Healthcare Companies, Inc. Visiont MidOcean Partners GTCR, LLC Peoplelink Staffing Solutions, LLC Dec 12 American Partners Inc. LTN Staffing, LLC Nov 12 Nov 12 Nov 12 Oct 12 Oct 12 CHG Healthcare Services Integrated Staffing Solutions, Inc. Trade Management, Inc. Brigham Group, Inc. Medrec, Inc. Provides healthcare staffing, specializing in outsourced clinical services, to schools and school districts. Provides technical staffing management and recruiting solutions in the United States and internationally. A consulting, content and technology company in the talent acquisition and management software and services space. Provides technical staffing solutions to energy, engineering, IT, commercial and scientific businesses. Provides physician and nursing staffing, and management, to correctional facilities in the United States. Provides information technology recruitment and placement solutions. Provides staff augmentation and permanent placement services for the business intelligence industry. Ares Management and Provides healthcare staffing services to hospitals and Leonard Green & Partners healthcare organizations in the United States. Method3, Inc. Peoplelink Staffing Solutions, LLC SEEK Careers/ Staffing, Inc. Accountable Healthcare Holdings Corporation Oct 12 TKE, Inc. Employment Control, Inc. Oct 12 Sep 12 Nevada Operations of Hire Dynamics, LLC, Creative Circle, LLC Provides information technology consulting services to government and enterprise customers. Enterprise Value (mm) EV / LTM Revenue EBITDA $1, x 49.0x Provides recruiting services for the construction industry. Offers staffing solutions for light industrial, administrative and professional positions. Recruits and employs therapists and assistants for healthcare facilities. Provides temporary staffing and human resource management services. EmployBridge, Inc. Offers staffing and professional recruitment services. Morgan Stanley Private Equity A staffing agency that represents advertising, creative and marketing professionals on a freelance and full time basis. Sep 12 Providus Group, LLC Document Technologies Provides contract and direct hire legal staffing services to law firms and Fortune 500 corporations in the United States. Sep 12 Sept 12 Sep 12 ADEX Corporation Global Novations LLC Elite Personnel, Inc. InterCloud Systems, Inc. (OTCBB:GGHO.D) Korn/Ferry International (NYSE: KFY) Peoplelink Staffing Solutions, LLC Aug 12 PeopleShare, Inc. Cross X Platform, LLC Aug 12 Dividend Staffing, Inc. MyStaf Aug 12 Aug 12 Jul 12 General Employment Enterprises Inc. Conmed Healthcare Management, Inc. Medical Connections, Inc. LEED HR, LLC Correct Care Solutions, LLC Jul 12 Allines, Inc. EmployBridge, Inc. Jul 12 Jul 12 Glotel and Idea Integration Adams Grayson Corporation Provides staffing solutions to the telecommunications and medical industries worldwide. Provides diversity, inclusion and leadership development solutions. Provides staffing solutions including temporary/contract, direct hire and vendor management services. Provides staffing services specializing in temp, contract, temp to hire, direct hire and flexible staffing. Places professional, technical and executive level candidates as direct hire, temp, temp to hire and contract to hire. Provides IT, engineering and accounting professionals as well as agricultural and light industrial staffing services. Provides staffing of healthcare professionals to correctional healthcare facilities. $ x $ x 12.8x $ x 9.2x Trustaff, Inc. Provides medical recruitment and staffing services in Florida. The Gores Group LLC Huron Legal (UK) Limited Provides temp, temp to perm and permanent staffing services in a wide variety of jobs. Provides project and staffing services to the mobile communications industry. Provides managed solutions/staffing for accounting and finance, E discovery and legal positions. $31.5 LTM = last twelve months; EV = enterprise value Source: Capstone Partners LLC research, Capital IQ, company public filings and press releases 3

5 SELECTED STAFFING M&A TRANSACTIONS (CONTINUED) Date Target Acquirer Target Business Description Jun 12 Eclipse Advantage, Inc. LaSalle Capital Group Jun 12 Jun 12 Invita Healthcare Staffing Corporation Cambridge Staffing, Inc. Accountable Healthcare Holdings Corporation QPS Employment Group, Inc. Jun 12 BANKtemps Workway, Inc. Jun 12 Productive Resources, LLC Lionbridge Technologies (NasdaqGM:LIOX) The Javers Group, Inc. Univest Insurance Inc. TRIOS Search Partners, Inc. Temporary Professionals, Inc. Bench International Search, Inc. Provides staffing solutions for warehouse, logistics and distribution operations. Provides per diem, travel contract and placement of healthcare professionals in clinical modalities. Recruits contractors in the areas of medical, engineering, sales, marketing, accounting, finance and IT. Provides staffing services to the financial services industry as temp, temp to hire, direct hire and executive placement. Provides outsourced engineering and drafting solutions, temporary contract employees and permanent staffing. Provides HR management and benefits outsourcing services to financial services, healthcare, technology and manufacturing. Offers executive search and human resources consulting in the biotechnology, pharmaceutical and healthcare industries. Enterprise Value (mm) EV / LTM Revenue EBITDA $ x 10.0x $5.0 Employment Control, Inc. Provides temporary staffing services. Apex Systems, Inc. On Assignment Inc. (NYSE:ASGN) Provides IT staffing services for contract, contract to hire and direct placements. $ x 14.3x Mar 12 Mar 12 Mar 12 Mar 12 Feb 12 Feb 12 Feb 12 Jan 12 Houston Operations of The Eastridge Group 6FigureJobs.com SOS Staffing Services, Inc. (Kansas City Operations) Staffing Specialists, Inc. Accord Human Resources, Inc. Careers in the Fire Service Metro Group, Inc. Transport Labor Contract/Leasing, Inc. ATS Corporation Medical Staffing Network Healthcare, LLC Medical Practice Management, LLC Kforce Clinical Research Inc. Employment Control, Inc. USA Staffing, Inc. Panhandle Correctional Care, Inc. Computer Methods Corporation Atterro, Inc. Callidus Software Inc. (NasdaqGM:CALD) QPS Employment Group, Inc. Doherty Staffing Solutions, Inc. TriNet Group, Inc. Praetorian Group, Inc. The Staffing Resource Group, Inc. High Street Capital and Cohesive Capital Partners Salient Federal Solutions, Inc. Epic Health Services, Inc. Provides customized staffing solutions for the manufacturing, assembly and distribution industries. An executive career management company offering online job search resources and content for job seekers and recruiters. $1.1 Offers staffing services. Offers clerical and light industrial staffing solutions. A professional employer organization, providing outsourced human resource management solutions. Provides firefighter employment listings and hiring information services. Provides IT recruitment services including executive search, contract, temporary and direct placement. A professional employer organization, providing human resources services to transportation clients. Provides IT and business consulting and staffing services primarily to government agencies in the United States. Provides healthcare staffing services to acute and non acute healthcare organizations. $ x 7.6x ClinicAnywhere Provides medical practice management and staffing services. inventiv Health, Inc. Claritas Capital QPS Employment Group, Inc. Conmed Healthcare Management, Inc. Premier Logic Jan 12 Janou Pakter Inc. JBCHoldings NY LLC Jan 12 PHS Staffing, Inc. Advantage On Call LLC Provides outsourcing and contract staffing as well as permanent placement services. Provides commercial temp staffing services in manufacturing, distribution/logistics, medical and online sales support. Provides staffing services on a temporary, long term assignment and contract to hire basis. Provides medical professional staffing services to healthcare facilities. Provides consulting, contract staffing, contract to hire and permanent placement services. Provides executive search and recruitment services for creative positions. Places healthcare providers in nursing and allied health professional jobs. $ x LTM = last twelve months; EV = enterprise value Source: Capstone Partners LLC research, Capital IQ, company public filings and press releases 4

6 PUBLIC COMPANY TRADING & OPERATING DATA Price % 52 Wk. Market Enterprise LTM 1 Yr Rev EV / LTM Company 2/1/13 High Cap Value Revenue EBITDA Margin Growth Revenue EBITDA AMN Healthcare Services Inc. $ % $546.4 $738.7 $928.2 $ % 7.1% 0.8x 2.8x CDI Corp. $ % , % 6.0% 0.3x 1.4x Cross Country Healthcare, Inc. $ % % 2.8% 0.4x 1.5x Heidrick & Struggles International Inc. $ % % (11.5)% 0.4x 1.2x Hudson Global, Inc $ % % (12.3)% 0.1x 0.4x Kelly Services, Inc. $ % , % (1.8)% 0.1x 0.7x Kforce Inc. $ % , % 17.4% 0.4x 1.3x Korn/Ferry International $ % % (2.9)% 0.8x 2.5x Manpower Inc. $ % 4, , , , % (6.0)% 0.2x 1.2x Monster Worldwide, Inc. $ % % (5.5)% 0.7x 1.4x On Assignment Inc. $ % 1, , % 79.6% 1.7x 5.5x Resources Connection Inc. $ % % 0.1% 0.7x 1.7x Robert Half International Inc. $ % 4, , , , % 8.8% 1.1x 2.9x TrueBlue, Inc. $ % , % 9.2% 0.4x 1.5x EV = enterprise value; LTM = last twelve months Mean 30.6% 6.5% 0.6x 1.9x $ is millions, except per share data Median 31.3% 1.5% 0.4x 1.5x Harmonic Mean 27.7% NA 0.3x 1.3x Last Twelve Month Margin Performance 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 28.3% 26.0% 20.2% 6.9% 3.8% 2.0% 31.2% 9.4% 37.1% 31.4% 31.6% 16.4% 16.6% 11.1% 1.2% 1.8% 2.9% 2.5% 52.8% 38.9% 40.1% 31.7% 12.7% 10.3% 9.0% 9.5% 26.5% 5.1% Gross Margin % EBITDA Margin % Last Twelve Month 1 Year Revenue Growth 90.0% 70.0% 50.0% 30.0% 10.0% 10.0% 7.1% 6.0% 2.8% 11.5% 12.3% 1.8% 17.4% 2.9% 6.0% 5.5% 79.6% 0.1% 8.8% 9.2% Source: Capital IQ as of February 1,

7 CAPSTONE PARTNERS: RECENT HUMAN CAPITAL TRANSACTION Capstone s professionals have completed several transactions in the human capital and consulting sector, including business sales, debt financing, and the provision of valuation advisory services, as well as acquisition services. Recently, Capstone advised Invo HealthCare Associates on its acquisition by Post Capital Partners in December Invo HealthCare provides healthcare staffing services to the educational market. Post Capital is a private equity firm that was attracted to Invo HealthCare s solid fundamentals and appealing growth prospects. Invo HealthCare was acquired as a platform investment, and Post Capital has plans to make future add on acquisitions in the sector. CAPSTONE PARTNERS: STAFFING INDUSTRY CREDENTIALS has acquired debt financing CERTIFIED IT & ITRICITY FREEDOM DATA NORTHERN HEALTHCARE CAPITAL valuation & financial advisory valuation & financial advisory ARIES GROUP INC. MORRIS, NICHOLS, ARSHT & TUNNELL LLP camdenvale 6

8 THE STAFFING INDUSTRY TEAM John Ferrara, Founder, President (617) John Ferrara, the founder and principal shareholder of Capstone, serves as the firm's President and Managing Partner. Over his extensive career in investment banking, venture capital and management consulting, John has executed over 100 related engagements representing in excess of $6 billion in value. John was formerly a Regional Managing Partner with Andersen Corporate Finance, where he founded the Boston office and held various national and global leadership positions. John started his career in Lehman's Brothers' M&A group in New York, London and Riyadh, later becoming a founding member of Rodman & Renshaw's M&A practice in New York. He earned an MBA in Entrepreneurial Studies from The Anderson School at UCLA and the London School of Economics, during which time he founded and operated a corporate finance advisory boutique, JG Atlas Advisors, and its related investment arm, Atlantis Capital Partners. He holds dual BA degrees from Wesleyan University and is qualified as a General Securities Principal. Daniel Schultz, Vice President dschultz@capstonellc.com (617) Dan oversees Capstone s national business development and industry coverage activities, working closely with current and prospective clients of the firm on matters related to corporate sales, recapitalizations, mergers & acquisitions and growth financings. In his role, Dan is able to deliver specific market intelligence to clients regarding M&A, financing, strategic, industry and competitive trends. Prior to spearheading the firm s business development and market initiatives, he was a Vice President in Capstone s M&A group, managing numerous successful transactions across a variety of industries. Dan also gained hands on transaction experience as an investment banker at Headwaters MB. He started his career with Ernst & Young s National Professional AABS practice in New York and later worked in Assurance and Advisory Business Services in the Denver office. Dan received a BE in Biomedical Engineering with a Business Minor from Vanderbilt University. He earned an MBA and a Master of Accountancy from the Daniels College of Business at the University of Denver. 7

9 ABOUT CAPSTONE PARTNERS Capstone Partners LLC is a leading national investment banking firm dedicated to serving the corporate finance needs of middle market business owners, investors and creditors. The firm provides merger & acquisition, private placement, corporate restructuring, valuation and financial advisory services. Capstone maintains various industry specialties including one in. The firm also possesses merchant banking capabilities to actively co invest in transactions. Additional information about Capstone Partners can be found at LEADERSHIP TEAM BOSTON CHICAGO PHILADELPHIA John Ferrara Ted Polk Eric Williams Founder, President Managing Director Managing Director (617) (312) (215) jferrara@capstonellc.com tpolk@capstonellc.com ewilliams@capstonellc.com LOS ANGELES SAN DIEGO Kevin Jolley David Bench David Michaels Managing Director Managing Director Managing Director (617) (949) (858) kjolley@capstonellc.com dbench@capstonellc.com dmichaels@capstonellc.com Capstone Partners Investment Banking Advisors World Class Wall Street Expertise. Built for the Middle Market Capstone Partners LLC. All rights reserved.