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www.dg.ca ACSESS – May 2008. Founded in Edmonton in 1976, we’re one of the largest privately held staffing firms in Canada; Operate 28 branch offices in 17 cities throughout Canada; Employ over 375 staff and a workforce of over 4,000 people; Revenue of $300 Million (2007) ; and
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www.dg.ca ACSESS – May 2008
Founded in Edmonton in 1976, we’re one of the largest privately held staffing firms in Canada; Operate 28 branch offices in 17 cities throughout Canada; Employ over 375 staff and a workforce of over 4,000 people; Revenue of $300 Million (2007); and Shares (ESOP) have increased in value 240% in the last 3 years. Who We Are…Highlights
Specialization… By Gross Margin ($42 million 2007) Information Technology, Accounting and Finance Engineering And Technical 15% 48% 37% Administrative and Light Industrial
Historical Sales Growth… 1979 - 2007 millions
Risk diversification Augment growth – target 30% of revenue growth Acquire talent – larger succession pool Expand customer base and market share Economic return M&A Strategy…
Established leadership Cultural compatibility Similar growth strategy Small companies that are easier to integrate Opportunity to add value through technology, capital, scale, geographic reach, management support, etc. Provide long term win for all parties (owners, employees, customers) Target Companies…
Established leadership Cultural compatibility Similar growth strategy Small companies that are easier to integrate Opportunity to add value through technology, capital, scale, geographic reach, management support, etc. Provide long term win for all parties (owners, employees, customers) Target Companies… Rank 3 2 6 5 4 1
Summarize three valuation models: Book value plus goodwill (goodwill of 2 - 3x EBT) EBITDA multiple (3 - 5x less debt) Capitalized after tax cash flow (less Capx) ranging from 12.5% to 25% return (4 - 8x) Based on: Normalized capital structure (debt/equity, working capital ratios) Normalized for non-market salaries, non-recurring and discretionary items, redundant assets, etc. Sustainable earnings Valuation…
Staffing Services EV/EBITDA Kelly Services 5.9 Spherion 5.1 Kforce 4.9 CDI 5.2 HR & Outsourcing First Advantage 6.8 Administaff 5.5 GevityHR 5.6 Barrett 4.6 Notes: 1. As of February 15, 2008 2. Enterprise Value (EV) = Debt + Equity + Goodwill 3. Source: Capital IQ, Thompson EBITDA Multiples…
Unrealistic price expectations Sustainability of current earnings Unreliable financial information Seller remorse…second thoughts Lack of rapport of owners Inexperienced advisors Some Reasons Negotiations Fail…
Unclear deal strategy; Inappropriate level of integration; Trying to change culture (values and behavior); Taking too long to make decisions; No one person in charge of integration; and Ineffective communication strategy. Some Reasons Integrations Fail…