The anatomy of an international deal
Recruitment International Asia get under the covers of the international private capital market to understand what it takes for an Australian business to become exceptionally globally marketable
The recent announcement of a majority purchase of Australian and Singaporean executive recruiter, Ethos BeathChapman (EBC) by Nikkei-listed Will Group, underscores the Japanese appetite for high quality assets.
The transaction, reported by Recruitment International Asia on 30th January 2017, sets a new bar for deal outcomes in the recruitment middle market and we were interested in how this was achieved.
The journey for the then Ethos Corporation Business began in 2013. Andrew Keayes, managing director of Ethos, was given the imprimatur of his shareholder group to find a corporate advisor and start preparing the business for international growth and investment. After a rigorous selection process, involving several prominent specialist and generalist recruitment advisory firms, Ethos selected MergeCo International, impressed by the firms ‘can do’ attitude and international credentials.
MergeCo commenced the engagement by forming an advisory board, focused on long term value creation and the sustainability of the business. In the words of Andrew Keayes: “This decision was one of the most important in the history of our business, selecting an advisor who would work with us in a structured way to turn a good business into a great one, you want a safe pair of hands. An advisor with a similar set of values who weren’t in it purely for the possibility of a short-term transaction.
“Much like recruitment, there’s always a leap of faith when procuring a service, the proof is in the pudding. We want our own clients to feel special and when I’m the client, I like to feel like that I’m the only client – MergeCo gave me that feeling, they were available Monday to Sunday, 8am to midnight. Nothing was ever too much, the stakes were big and there were several pressure moments – its times like that when you find out if you’re working with the right people.”
Founder and managing director of MergeCo International, Paul Hawkins, said, “It is quite rare for a group of owners to approach capital succession so proactively, so, when we met the Ethos team, we saw it as a rare and compelling opportunity to create value and transform the lives of all of the owners of the business.”
MergeCo appointed Kevin Chandler (of Chandler Macleod fame) to the advisory board to provide the deep industry experience required to guide Ethos to operational excellence and benchmarked the business at that point. Over the next three years, the value of the business would more than double - as a result of executing against the advisory board’s operational improvement initiatives, including a non-organic growth strategy, culminating in the merger with the Singapore-based BeathChapman in 2014.
In 2015, the merged business had reached an inflection point where it could scale significantly through a complimentary international strategic partner and MergeCo obtained shareholder approval to commence the international search. Culling an initial list of potential investors to 220 parties in 30 countries, MergeCo acted through its network of equity partners (Global M&A Partners) to start the investment discussions. These played out over thousands of phone and conference calls, in over 20 different languages, and resulted in four final suitors from the UK, US, Denmark and Japan.
After extensive negotiations and a number of reciprocal visits, the deal was signed in Tokyo in January 2017, and announced to the Japanese stock exchange, with Will Group as the delighted preferred bidder of a majority stake in the outperforming EBC.
Image courtesy of Shutterstock