Method Behind Adeccos Madness – US-FOREX.US
Ever wonder just how badly the recession is affecting the employment market? A quick glance at Adecco’s second-quarter results says it all. Sales in France, Germany, Britain, the United States and Japan shrank at double-digit rates, while the company reported a loss of 208 million after writing down the value of intangible assets. Strange, then, that Adecco at the same time announced a 165 million bid for British recruitment company Spring Group, at a time when it expects business conditions to remain “demanding.”This isn’t the first time Switzerland’s Adecco
has tried to acquire a British staffing company since the start of the economic downturn. Last summer it voiced its interest in buying white-collar recruiter Michael Page International
, proposing a purchase price of 2 billion; Michael Page’s shareholders snubbed the offer and the courtship quickly ended after the collapse of Lehman Brothers in September. The affair seemed to reinforce Adecco’s yen for financial prudence.
Spring Group
is clearly not the size of Michael Page, but Adecco’s offer price of 62 pence per share, or around 100 million pounds in total, is still a sizeable 22% premium on Sprint’s closing price Monday of 51 pence . The difference is that Adecco is presenting the deal as a conservative way to cut costs and turn around its British operations, which were experiencing a slowdown even before recession hit, as opposed to a risky expansion.Shares of Spring Group jumped 20.1%, or 10.25 pence , to 61.25 pence , during midday trading in London. Adecco was down 4.2%, to 50.65 Swiss francs , in Zurich.Adecco said there would be “substantial synergies” from the deal, and also that it would bring in new management; acquiring Spring Group was simply an alternative to doing things organically. The chief executive of Spring Group, Peter Searle, is actually a former Adecco employee as well, so there won’t be a culture shock.”Adecco definitely needs a good management team in the U.K.,” said Michael Foeth, an analyst with Bank Vontobel, who said Spring Group’s focus on professional staffing could also bring in growth and profitability in the future. But he rated Adecco shares “hold,” and said that even though the company was operationally profitable he could not rule out the possibility of more goodwill impairments or more quarterly losses.
“We have not seen the bottom,” said Foeth. “In absolute numbers, [the recruitment market] is still declining.”