Annex CEO interview appears in Mergermarket
Annex CEO interview appears in Mergermarket, the leading provider of forward-looking M&A intelligence and data to M&A professionals and corporates around the world: www.mergermarket.com
Annex Consulting Group receives frequent approaches, CEO says
By Chris Deluca in Toronto
July 25, 2016
Annex Consulting Group, a Vancouver-based IT staffing company, has begun to see an uptick in the amount of inbound interest it receives, said Stacey Cerniuk, CEO of Annex Consulting Group.
Speaking to the growing buy-side attention, Cerniuk noted that at one time he received calls on a monthly basis from prospective bidders. Now it happens weekly.
Annex, within the past two months, received significant interest from a buyer willing to value the company at 6x EBITDA. With value that can still be built into the company, Cerniuk said, there is not an overwhelming desire to sell. However he went on to qualify 6x as a “decent offer.”
At the moment, the space is attracting multiples which are approaching 10-year highs, said Cerniuk.
Deal multiples for the staffing space, he added, have typically been in the 3x to 5x EBITDA range, however, now firms are selling at 6x to 7x, and possibly even 8x. Annex is projecting revenue of approximately CAD 31m by the end of its fiscal year, in September. The executive declined to comment on EBITDA.
The company has received interest from several advisory firms. Despite the heightened attention, Annex is not in an active process of selecting or shortlisting a firm. Cerniuk, citing a report from Duff & Phelps, said there were 57 deals within the staffing industry through 1H 2016.
Valuations are likely to remain at their current level for the next 18 months, after which he believes they might head lower. Asked if this may influence his mindset about selling the company, Cerniuk said he grapples with that question “all the time.”
Annex has Master Service Agreements in place within B.C. which allow it to compete for public contracts, he noted.
The most common prospective suitors that Annex has seen are US players and large Canadian players, followed by private equity firms from all over the US. In the event of a sale, Cerniuk would not have a preference as to whether he remained on to manage the company or was bought out entirely, as some PE firms have sought majority stakes but to keep the management team in place.
Cerniuk agreed with several Canadian firms suggested as possible suitors — Eagle Professional Resources, Procom, and S.i. Systems— going on to add that Annex has “definitely” been in conversations with some of those players in the past. S.i. Systems has recently been active, acquiring Toronto-based IT staffing company Redwood Global, for an undisclosed sum but with reported revenue of CAD 26m.
The majority of the interest received has been from larger US players, Cerniuk said.
Posed with the question of whether mid-sized US firms such as Princeton Information, Starpoint Solutions, and Solomon Page Group could be potential suitors, Cerniuk noted that the interest Annex has received has come from much larger players. The executive agreed that Randstad (AMS:RAND) would be in that much larger group, adding Michigan-based Kelly Services (NASDAQ:KELYA).