14 MINUTE AUDIO DISCUSSION FOCUSING ON A 2017 SECOND QUARTER STAFFING INDUSTRY UPDATE WITH BILL INMAN AND STAFFING INVESTMENT BANKER / INDUSTRY ANALYST JIM JANESKY

Jim Janesky
Managing Director

Corporate Fuel Advisors

About the Discussion

TargetRecruit’s Executive Vice President Bill Inman has an insightful discussion with Jim Janesky, Managing Director at Corporate Fuel Advisors, discuss current staffing industry trends (Q2 2017), public staffing company valuations and valuation in the staffing mid-market in this interview (13 minutes total discussion).

Mr. Janesky leads the Business Services practice at Corporate Fuel Advisors which includes the staffing industry. Corporate Fuel Advisors is a middle market M&A advisory firm that also raises debt and equity capital and provides leadership recruitment for top companies. Mr. Janesky spent 20 years on Wall Street as an equity research analyst for companies like Robert Half, Manpower, Monster and LinkedIn before joining Corporate Fuel Advisors.

Topics such as H1B visas and legislation and how it impacts professional staffing verticals, the state of the public markets for staffing companies, the effect of the “Trump Trade” and the rapid increase in the value of staffing companies since the election as well as the pre-election slowdown,

Discussion Key Quotes [Time of topic in audio file in brackets]

WHAT IS ON THE MINDS OF STAFFING COMPANY OWNERS AND EXECUTIVES – [3:24] “Now the suspension of the visa process has created a chill over the industry (in professional staffing); when you look at other verticals [outside of professional staffing] what is on executives minds is the pace and amount of infrastructure investment, will we have tax reform and what is the timing, and other economic stimulus issues”

JUMP IN PUBLICLY TRADED STAFFING COMPANY STOCKS – [3:09 / 4:23] “Since the election we have seen the staffing stocks as an entire group move up quite considerably” – “stocks are going up as earnings estimates are going down [which is] not normal for the stock market”

STOCKS AND VALUATIONS UNDER PRESSURE IN THE SHORT-TERM? – [4:10 / 5:25] “Valuations of the publicly traded stocks that trickles to the private markets could come under pressure if [earnings] estimates start to come down and there are concerns about whether or not some of the new administration’s policies will be implemented”

CURRENT STATUS OF THE M&A AND EQUITIES MARKET – [5:27 / 6:43] “The M&A market is still robust, there is more buyers than sellers, and there is still very good access to the debt and equity capital markets” – “the multiples of companies in the private market when they sell… depend on many factors with high end professional services, with strong growth rates and very good margins getting the best valuations. The highest valuations are for reserved HR technology companies who getting a high valuation of revenues.”

STEPS TO CONSIDER IN A STAFFING COMPANY EXIT – [8:25] “The first step [when considering an exit] is an evaluation of strategic alternatives: [such as] Do I want to sell my whole company? Do I want to sell a majority interest in it? Do I want to do a management buyout?. The second [includes answering the questions]: What are my expectations for a sale? Do I have a multiple of EBITDA or a multiple of revenues in mind that might be out of line of current industry trends? What type of structure do I want in the transaction, am I willing to accept equity or am I willing to take on a seller’s note? Third step is get your financials in order as it makes the process better and won’t deter from the valuation. Last thing is to determine, with your advisor, what are the investment highlights and have the advisor manage the process for you.”

PREPARING FOR A STAFFING COMPANY EXIT – [9:55] “A lot of times owners are not necessarily prepared [for a sale or investment] and part of the reason is their expectations may be out of line, they don’t realize the time involved [with the process], and then they are not sure about how the process works” – “the [total process] can take 6 to 9 months or more once a company is prepared [to go to market]”