To the strains of Billy Joel’s Uptown Girl, the big news from the New Zealand recruitment industry this week was of course Allied Workforce’s acquisition of Madison. This is positive activity within our sector that has kind of bumbled and stuttered along for the last four years and should be a shot of adrenalin to other recruitment companies out there.
Merger and acquisition activity is often a sign of improving economic activity and confidence. A couple of smaller transactions happened in the run up to this, with Talent International buying out Neal Andrews in Wellington and RecruitIT’s recent acquisition of Sead, but this $30m sale (rising to $36m if Madison reach certain financial projections), is a big ticket recruitment sale and makes them easily the largest recruitment business in New Zealand.
I had a chat with Madison CEO Simon Bennett yesterday who was very upbeat about prospects. He admitted Madison had probably grown as far as it could as a privately-owned company in the New Zealand market. This removed the need to gear up for an IPO and float of their own and now, as a public company, will bring a new dimension to board input and working to provide shareholder returns that will continue to drive the combined entity further forward. The founders of Madison, Wynnis and Marisa, will remain on the Board and the Madison brand, set-up, sytems, and operations will all remain intact. For now anyway.
To me, $30m does seem like quite a steal for AWF though. Madison have a good brand and reputation (on the whole anyway, it’s hard to be universally well-regarded as a brand when you reject more candidates than you place, as we all do). They have a large contractor and temp book and secure places on a number of lucrative PSA’s. But I guess it’s a win-win for all parties. Madison’s shareholders get nearly all of the cash paid upfront and access to an even wider client base and office network. AWF, whose performance has flattened out under the shadow of Christchurch’s stalled rebuild and have been trimming back staff numbers themselves, have been able to swiftly diversify into the white collar space and add new revenue streams that will add greater balance and less reliance on the blue-collar sector.
Right now this all sounds good in theory. The trick will be for Simon and the Madison board to keep a tight hold on their current culture and values. There’s been a number of white-collar buyouts from blue-collar recruiters over the years. Manpower bought Elan. Chandler Macleod bought OCG. Adecco have done it numerous times in Australia, the purchase of Jonathan Wren springing to mind. And, once the honeymoon period is over, some forge more productive and successful partnerships than others. Sometimes the purchased company disappears from collective conscience altogether and, once the staff move on as well, the culture is lost forever.
If nothing else though, we in recruitment are opportunists. According to Simon Bennett some competing agencies have already started attempting to entreat and lure his staff away. Companies like Kelly Services, Martin Personnel and more have sent emails to some of his staff asking whether they would like to jump ship rather than work for a blue collar recruitment business.
At this stage it’s still unclear whether they’re being ironic or not…