Staffmark Goes Global With British Acquisition

With the acquisition of Robert Walters Plc in November, Fayetteville-based StaffMark Inc. became a global company that deals primarily with professional and technical workers.

The $179 million acquisition will give StaffMark about 6,000 clients, 31,500 employees and more than 240 offices around the world in cities such as New York, London, Johannesburg, Bangkok and Vancouver. The combined companies will have annual revenue of more than $1 billion. StaffMark has no plans to lay off employees, but will centralize overlapping offices, says StaffMark CEO Clete Brewer.

Robert Walters, the United Kingdom’s leading accounting and finance recruiting firm, had 18 offices in 10 countries. The purchase of Robert Walters means that 55 percent of StaffMark’s business is now concentrated in professional fields – such as law, technology and accounting – rather than the traditional commercial fields for staffing agencies such as clerical jobs.

StaffMark provides diversified staffing, professional and consulting services to businesses, professional and service organizations, medical niches and governmental agencies.

StaffMark has been at the vanguard of changes in the staffing industry. Many highly educated, professional workers now move across the country for seasonal and temporary jobs with different companies much like migrant farm workers did decades ago.

Five years ago, businesses tried to save money by using these temporary professional employees and not paying them benefits, but that has changed, says Brewer. Talented workers are in such high demand, the companies have to provide excellent benefits.

Brewer says the workers in StaffMark’s information technology solutions division, IntelliMark, have better company benefits than he does. StaffMark provides the workers with health, dental and life insurance, a stock purchase plan, a 401(k) and other benefits.

StaffMark Changes

The changes will probably mean more revenue for StaffMark, which already will bring in about $1 billion in revenue this year, says Brewer. Nationwide, professional staffing divisions are growing by about 20 percent per year, says Peter Vozzo, an industry analyst with Interstate/Johnson Lane in Charlotte, N.C. Commercial staffing divisions are growing by about 7 percent per year.

Vozzo and Brewer say StaffMark is growing by more than the national average in both the commercial and professional areas.

StaffMark acquired 17 companies during the first year after its initial public offering and merger of six founding companies on Oct. 2, 1996. A year ago, Brewer told the Northwest Arkansas Business Journal that StaffMark had a policy of “controlled growth.” Brewer said he was more comfortable with about 12 acquisitions per year, and that the acquisition pace would probably slow to that rate.

But StaffMark swallowed up another 22 companies since October 1997. Excluding Robert Walters, the company’s acquisitions ranged in size from $10 million to $60 million.

Brewer says StaffMark is now acquiring only companies that are growing faster than StaffMark itself.

“We have a very strong integration team, and we’re able to integrate companies very efficiently,” he says. “We feel comfortable with about two deals a quarter, [sometimes as many as three].”

Brewer says the information technology services industry has annual revenue of $250 billion per year, and staffing agencies that deal with information technology services have revenue of about $100 billion per year. So Brewer believes there’s plenty of room for StaffMark to continue to grow. At some point, that growth will slow, but company officers haven’t even discussed when that might be.

“There will come a point where, obviously, the integration will pay off for us,” he says.

Just two years ago, StaffMark’s revenue was a mere $198.4 million. Last year, it reached $426.5 million. This year, Brewer says, revenue will be around $1 billion, and analysts predict revenue for the company to be $1.2 billion in 1999.

Brewer says he’s comfortable with Wall Street estimates of 42 cents per share in earnings for the fourth quarter of the year before a $14 million one-time charge because of the acquisition of Robert Walters. StaffMark posted earnings of 29 cents per diluted share for the fourth quarter of 1997.

StaffMark now has five divisions: StaffMark, the core staffing division; IntelliMark, an information technology solutions division; the Robert Walters division; Strategic Legal Resources; and Clinical Trials Support Services, which deals with pharmaceutical research and clinical trials.

For the 12 months ended Sept. 30, StaffMark’s revenue increased by 97 percent to $674 million and net income increased by 117 percent to $28.7 million.

For its third quarter ended Sept. 30, StaffMark’s posted net income before merger costs of $9.5 million, or 42 cents per diluted share, on revenue of $196 million. For the same period last year, StaffMark recorded a net income of $4.9 million, or 28 cents per diluted share, on revenues of $121.6 million.

Vozzo expects StaffMark to grow internally by 15-17 percent during 1999. He says the company’s commercial division is growing by about 10 percent annually, 3 percent greater than the industry average.

And that growth doesn’t include acquisitions.

Walters Purchase

Robert Walters has been the largest acquisition for StaffMark so far. For the first six months of 1998, Robert Walters had revenue of $118.6 million and net income of $2.3 million. With the acquisition, 21 percent of StaffMark’s business will now be in the United Kingdom and 6 percent of the business will be in continental Europe and Asia.

Vozzo says the acquisition may put StaffMark among the 20 largest staffing agencies worldwide, but it’s difficult to tell for sure.

In mid-August, StaffMark announced its plan to swap 0.272 of a share – shares were trading at about $25.68 per share -for each Robert Walters share in a deal pegged at about $179 million in stock. StaffMark’s stock has since slipped to about $23 per share, squeezing the value of the deal. When completed, stockholders of Robert Walters will own about 24 percent of the stock in StaffMark. Robert Walters shareholders will receive StaffMark shares valued at $140 million.

“In addition to the strategic importance of this transaction, the corporate cultures of Robert Walters and StaffMark are quite similar,” says Brewer. “We believe that this transaction, our largest to date, will set the global standards for managing the human capital needs of multinational corporations.”

Before the Walters acquisition, StaffMark had international offices only in Bangkok, Thailand and Johannesburg, South Africa. Those offices came along with acquisitions in early 1997.

Robert Walters became a public company the same year as StaffMark and specializes in placing accounting, finance and information technology professionals on a contract, temporary and permanent basis with clients in the advertising, technology, retailing and financial sectors.

“This is our largest transaction to date and will provide StaffMark with critical mass in the U.K. as well as significant platforms for growth in continental Europe, Australia and Asia,” says Brewer.

Robert Walters operates in the United Kingdom, continental Europe, the United States, the Asia Pacific region and South Africa. The acquisition gives StaffMark offices in London, Windsor and Wellington, all in England; Amsterdam, Holland; Auckland and Wellington in New Zealand; Brisbane, Sydney and Melbourne in Australia; Brussels, Belgium; Frankfurt, Germany; Hong Kong, China; Johannesburg, South Africa; Singapore and New York.

After the merger, Robert Walters will operate as a division of StaffMark. Brewer will continue as president and CEO of StaffMark, and Rob Walters will remain as president of the company that bears his name. Rob Walters will also join StaffMark’s board of directors. Two other key executives of Robert Walters, Ben Anderson and Giles Daubney, will take a leading role in the global expansion of the combined companies.

“By combining our international network with StaffMark’s U.S. coverage, we will create a genuinely international recruitment and human resources solutions group,” says Walters.

The company’s operations are divided into four divisions: Robert Walters Associates, the permanent recruitment division; Robert Walters Resourcing, the contract and temporary recruitment division; Robert Walters Technology, which provides employees for technical jobs; and Resource Solutions, which provides outsourcing.