Is IT worth it

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					Is It Worth It???

         FMCB Corporate Finance
     Celebrating 25 Years of Successful Business

         The Recruitment Conference
               16 March 2006

                                          22a Theobalds Road
                                           London WC1X 8PF
                                            Tel: 020 7405 2626
                                   philip@fmcbcorporate.com
                                     www.fmcbcorporate.com
Philip Ellis

   Chartered Accountant
   Specialise in Corporate Finance
   Director of FMCB Corporate Finance
   Particular expertise in recruitment sector, 10
   years of transaction experience
   Enjoy initiating and structuring deals
FMCB Corporate Finance

  Corporate Finance Boutique

  Team of 10 – Qualified Accountants and Graduates

  Regulated by Institute of Chartered Accountants in
  England & Wales

  Lead Advisors on Acquisitions and Disposals

  Interim Finance Directors for Growing Businesses

  Entrepreneurial Approach to Corporate Finance
Recruitment Deals

 Completed Deals
     Acquisition of Allied Healthcare agency
     Acquisition of Domiciliary Care Agency by AIM-Listed client
     Sale of 4 generalist agencies by AIM-Listed client
     Acquisition of Doctors agency


 Live Deals
     Acquisition of IT agency
     Disposal of industrial agency
     Acquisition of GPs agency
     Flotation of recruitment group
Supporta plc –
Formerly Staffing Ventures plc
         Founded February 2001 – floated on AIM raising £1m
         Incubator for recruitment start-ups
         Put management team together
         I was Finance Director then Non-Executive Director


                                          Market Capitalisation

           70,000
                                                                           56,967
           60,000

           50,000
 £’000
           40,000
                                                                  24,814
           30,000

           20,000
                       3,025      3,332        3,646    9,048
           10,000

                0
                      2001        2002         2003     2004      2005     2006
                       Feb         Feb          Feb      Feb       Feb      Feb
Is It Worth It???

Insider’s Guide to Acquiring a Recruitment Business

What does a Purchaser Look For?

     Strong market presence and reputation
     Knowledge of your market and trends
     Robust client relationships
     Spread of clients
     Healthy margins
     High quality management beyond the vendors
     Motivated team
     Profitable business model
     Cultural fit
Motivated Team
Indicators

    Length of service
    Staff turnover
    Basic pay, commission plan, bonuses, other benefits compared to
    market averages
    Working conditions and environment

Other Possibilities

    Commission plan acts as golden handcuffs
    Share ownership
    Share options
    Prizes
Grooming for Sale

Successful Sales are the Result of Planning and Grooming

A Few Pointers:
    Turnover and Gross Margin Trends
    Continuity of Client Relationships
    Established Team
    Management Structure and Consultant Development
    Growth Opportunities
    Visibility of Profits
    Investment
Sale Process

              Prepare
               Sales          Receive an
               Memo               Offer
                                                 Receive
 Decide to                      Evaluate         Approach      Receive an
              Appoint
   Sell                           Offer
               Advisor                                         Approach

                            Negotiate Heads        Supply
                             of Agreement
              Draw Up                            Information
             Distribution
                 List         Due Diligence
                              (Commercial,
                            Financial & Legal)


                             Completion
Issues To Consider
When Selling

  Valuation
  Asset or Share Sale
  Surplus Assets
  Earnout
  Confidentiality
  Warranties and Indemnities
Issues To Consider
When Selling - Valuation
    Multiple of Earnings
    Use of EBITDA
    Adjustment of Profit
    Average/Weighted Average of Profits
    No Absolute Right or Wrong

Example
                  Yr 1         Yr 2         Yr 3
EBITDA           £100k        £400k        £250k


A. Don’t touch with a barge pole

B. Most recent profit = £250k, then apply multiple

C. Weighted average profit = (1x£100k) + (2x£400k) + (3x£250k) = £275k, then apply multiple
                                              6
D. Don’t know
Issues To Consider
When Selling - Valuation

£’000

500
                                    A. Don’t touch with a barge pole
400                                 B. Most recent profit
                                    C. Weighted average profit
300
                                    D. Don’t know
200

100

 0


        Year 1   Year 2    Year 3
What Multiple is
Appropriate

This will be Determined by:

   Comparative plc Multiples
   Strategic Fit
   Size of Business
   Risk Factors
   Niche Specialisations
   Market Sentiment
   Recent Deals
   What the Purchaser is Willing to Pay
Key Issues to Consider


  Ensure the business can run without you

  Make the business as robust as possible to withstand any
  nasty surprises

  Specialists are more valuable than generalists – differentiate

  You never know when someone like me might write to you

  Use experienced professional advisors
Questions

                 Philip Ellis
        FMCB Corporate Finance
   Celebrating 25 Years of Successful Business

       The Recruitment Conference
             16 March 2006

                                        22a Theobalds Road
                                         London WC1X 8PF
                                          Tel: 020 7405 2626
                                 philip@fmcbcorporate.com
                                   www.fmcbcorporate.com

				
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