Big Moves in the Staffing World: Randstad and Adecco Make Major Acquisitions

Yesterday, Adecco Group, the world’s largest staffing firm, announced plans to acquire New York-based outplacement firm Drake Beam Morin Inc., a deal that cost $216 million. The transaction is expected to close in the third quarter of 2011. Adecco’s Lee Hecht Harrison outplacement division ranked as the second-largest outplacement firm on Staffing Industry Analysts’ 2010 list of largest staffing firms. Drake Beam Morin ranked as the third-largest.

This news comes just a few days after Randstad Holding NV, the world’s second-largest staffing firm, announced its plans to acquire SFN Group Inc., the world’s 13th-largest staffing firm. The combined company would be the third largest staffing firm in the U.S. — Randstad currently ranks No. 6 and SFN Group No. 7 — based on 2009 estimated U.S. staffing revenue. While the transaction must still be approved by SFN shareholders, SFN’s board has unanimously approved the deal. The deal is expected to close in September.

SFN employs more than 170,000 people annually, with brands including Technisource, Tatum, The Mergis Group, Todays Office Professionals, SourceRight Solutions, and Spherion Staffing Services. This acquisition will further expand Randstad’s international presence, which currently includes 43 countries, in addition to making it the second-largest information technology staffing provider in the U.S. as well as the second-largest provider of office/clerical staffing. Randstad reports that the combined company would be a leader in RPO.

Similarly, Adecco’s acquisition of Drake Beam Morin Inc. will expand its geographic reach and give it a leading position in the United Kingdom, Canada, and Brazil. Adecco’s CEO, Patrick De Maeseneire, said, “The combined businesses will provide a global presence in the outplacement and talent development services sector, enabling us to better serve our clients internationally. This fits very well with our customers’ increasing needs for global solutions across the full range of HR services. The move strengthens Adecco with an effective counter-balance to the temporary and permanent staffing business, given the counter-cyclical nature of the career transition sector.”

Last week Timothy McHugh, a William Blair analyst, stated that on a long-term basis, the Randstad/SFN deal is another example of how large, industrial-focused staffing companies are spending significant amounts of money to buy professional staffing firms, which shows that they still see potential for strong growth and returns on investment in those sectors. He said that the disruptions caused by the combination of the two companies could create opportunities for similar companies such as Manpower Inc., Robert Half International Inc., On Assignment Inc., and Kforce Inc. This was before the Adecco announcement.

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However, in an article from Recruiter.co.uk, Chris Burger, a specialist Adecco analyst at Helvea Equity Research, stated, “I don’t think this [Adecco’s acquisition] is a direct response to Randstad’s acquisition last week. Randstad’s acquisition was much bigger and Adecco’s acquisition is the outplacement segment — I would not link the two acquisitions.”

Regardless of motive, the moves by each of these companies reflect some major changes to the staffing industry, surely to be followed by mixed reactions from some of the other top staffing firms.

In other positive news, as reported Tuesday by the American Staffing Association’s Staffing Index, staffing employment in July is 3.6% higher than in the same month last year. The index for July is 88, up one point from the 87 reported for June. With the exception of the typical dip experienced during the July 4 holiday period, weekly index data show that staffing employment has been modestly edging upward since February. The recent acquisitions by Randstad and Adecco reflect a positive outlook for staffing activities and, hopefully, a drop in unemployment numbers in the July BLS Report, which will be released August 5.

Amybeth Quinn began her career in sourcing working within the agency world as an Internet Researcher. Since 2002, she has worked in both agency and corporate sourcing and recruiting roles as both individual contributor and manager, and also served previously as the editor of The Fordyce Letter, FordyceLetter.com and SourceCon.com, with ERE Media. These days she's working on some super cool market intelligence and data analytics projects. You can connect with her on Twitter at @researchgoddess.

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