Deal focus: Macro headwinds weigh on Peoplebank exit

Navis invested A$60 million in Peoplebank before the global financial crisis in 2007 through a A$50 million equity subscription and a A$10 million placement, acquiring a 77% stake in the business. The capital went towards the $100 million takeover of industry rival Ambit Group in order to create Australia's largest IT recruiter.

At that time, the PE firm was optimistic the long-term growth prospects of the business. The Australian government had launched a slew of programs to promote internet-based services and Peoplebank's revenues were always significantly driven by IT-focused capital expenditure initiatives from large corporations and government. The company had formed exclusive business relationships with market leaders across banking, telecom and airlines, and Navis was looking to build on these. But then the capex initiatives slumped.

"We faced two macro challenges. One followed immediately as a result of the financial crisis - the slowdown of major capex initiatives - that hit to IT recruitment needs. The second was the gradual disintermediation through technology that created margin erosion across the industry," says Rodney Muse, managing partner at Navis.

The PE firm still worked to deliver growth. In 2009, it teamed up with Leon Lau, Peoplebank's founder and managing director to acquire the remaining 23% of the company for A$13.4 million through a management buyout. Two years later, the company expanded into Singapore, Hong Kong and Kuala Lumpur, and Asia now accounts for about 20% of group profit.

"Our Asia expansion is a significant mitigation to the macro headwinds but not sufficient enough to change it from a return of capital to a profitable exit," Muse says. Currency shifts have also had an impact.

Given Peoplebank's strong position in its market niche, a number of strategic investors had expressed an interest in the business over the years, including Recruit Holdings, one of the largest staffing agencies globally.

"When management teams from Peoplebank and Recruit Holdings interacted, there was an excellent rapport and obvious synergies in terms of complementary capabilities, scale and access to international markets. Ultimately when it came to decide to exit or not, we thought that Recruit Holdings paid a fair price for the business and it's a very logical exit for us," Muse says.

The acquisition of Peoplebank is part of a broader expansion strategy through which Recruit Holdings wants to become the world's leading integrated HR service provider by 2020.

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• Topics
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• Australasia
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• Japan
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