To all,
SOURCE: De Bellas & Co.
Staffing Industry Posts Record Number of Mergers in 1st
Quarter of 1998
Transaction Volume Rises 19% Over Previous Quarter, With PEOs More
Active Than Ever Before
HOUSTON, April 13 /PRNewswire/ -- The number of mergers and acquisitions (M&A) occurring
in the U.S. staffing and information technology (IT) services industry reached an all-time high during
the first quarter of 1998, according to statistics compiled by De Bellas & Co., the nation's leader in
providing M&A services to staffing and IT services businesses.
Sixty-six buyers engaged in 123 transactions during the first three months of 1998. Businesses in
California, Florida, New Jersey and Texas accounted for one-third of this total.
By comparison, transaction volume was up 50 percent from the same quarter a year ago, and 19
percent from the fourth quarter of 1997.
A total of 358 mergers and acquisitions were closed by 138 different buyers during 1997.
The latest quarter's figures reveal that a large, diverse array of companies are making acquisitions.
The three most-active buyers in the first quarter accounted for 15 percent of the transactions.
OutSource International, Inc. (Nasdaq: OXIS - news) of Deerfield Beach, Fla., was most active
with eight acquisitions. Personnel Group of America, Inc. (NYSE: PGA - news) of Charlotte, N.C.,
was next with six purchases, and Interim Services, Inc., (NYSE: IS - news) of Fort Lauderdale,
Fla., was third with five.
The remaining 63 buyers accounted for 85 percent of the deals completed, indicating a wide
dispersion of activity, according to Melanie McFaddin, a Managing Director of De Bellas.
Twenty-nine buyers were involved in more than one transaction.
More than 40 percent of the industry's mergers and acquisitions in the first quarter involved IT
services businesses.
''This is the fourth straight quarter in which IT businesses have been included in more deals than
either traditional or specialty staffing companies,'' she observed. ''That's a pattern we don't expect to
change any time soon, given the shortage of skilled IT workers in the U.S.
''Staffing and IT services companies are responding to an economy that has recognized the necessity
for highly skilled contract workers, especially in the technical areas,'' she said.
Two other trends being observed by De Bellas are the increasing occurrence of stock related
transactions and the rising number of deals involving professional employer organizations, or PEOs.
''PEOs have produced one of the most interesting trends we see,'' said Richard G. Wilson, Jr., also
a Managing Director at De Bellas.
''A PEO is a business that, under contract, takes on the responsibilities of human resources, payroll,
benefits and other administrative services for another company,'' he explained. ''PEOs are especially
popular with entrepreneurs and small-business owners. But their value is being recognized by
companies of many types and sizes today.
''Before the early 1980s they were virtually non-existent,'' he said. ''More than 2.5 million people
are currently hired under such arrangements, up from about 200,000 a decade ago,'' he said.
In the first quarter of 1998, 10 percent of the M&A transactions in the staffing and IT services
sector involved PEOs.
The high-level of M&A activity involving traditional staffing companies reflects buyers' recognition of
the tightening labor market for skilled clerical and light industrial employees, according to Mr.
Wilson.
Ms. McFaddin noted that, overall, the dynamics of the staffing and IT services industry reflect events
that are altering the national business landscape.
''The first quarter of this year was the second-busiest ever in terms of M&A activity throughout the
larger domestic economy. According to Securities Data Company, the value of transactions in the
January-March quarter was $243 billion,'' she said. ''The only three-month period in which activity
was more brisk was the last quarter of last year.
''Out of the 2,500 corporate combinations that have occurred so far in 1998, one in every 20 has
involved staffing and IT services companies,'' said Ms. McFaddin.
De Bellas & Co., headquartered in Houston, serves as an advisor in all facets of M&A activity for
staffing and IT services company clients. According to recent data provided by Staffing Industry
Report, an authority in the staffing business, De Bellas & Co. plays a role in approximately half of all
industry transactions in which intermediaries are involved.
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