Finance
Fertile soil for growth AS MARKET CONDITIONS IMPROVE, IT’S LOOKING LIKE A GOOD TIME FOR RECRUITMENT FIRMS TO SECURE FUNDS FOR EXPANSION. SCOTT BEAGRIE LOOKS AT THE OPTIONS AVAILABLE After all the talk of recovery and growth, if the recruitment industry needed a tangible sign that the good times might just be returning, it would be the public equity markets’ interest in the industry in recent months.
Adrian Kearsey
ISTOCK
Adrian Kearsey, head of small capital research, support services, at financial advisory firm Sanlam Securities, points to strong share price increases over the past year from the likes of Harvey Nash (up 71%) and Matchtech (up 80%) as evidence of this interest, alongside Staffline Group’s having more than doubled (up 112%). The latter raised £16m by placing 2m shares at 800p — at the time of writing they were 910p — to fund its acquisition of Avanta Enterprise. “So that indicates the equity markets are open for financing staffing growth,” says Kearsey, who adds that the industry hasn’t seen a “meaningful staffing” IPO (initial public offering) since 2007. “We have had some small fund raisings, but the Staffline transaction sends a clear signal.” The availability of public market equity as one of the channels for financing growth is more of a symbolic one than a real option for the vast majority of small and medium-sized enterprise (SME) recruitment businesses. Nonetheless, many of these with aspirations of growth will be encouraged by the confidence the market is showing in their industry. At the start-up or smaller business end, there are several options, the most obvious being banks that have a specialist arm in the sector. According to Sean Dixon, head of business services covering the recruitment sector at Royal Bank of Scotland (RBS), it is vital that recruitment business owners not only share their plans and strategy with the bank but are also candid about their strengths and weaknesses. “What is their strategy if things don’t go according to plan? — because the person from the bank needs to be able to articulate the client’s story when they are trying to convince the credit departments to lend them money,” he says.
“The more people are open, honest and share information, the more chance they have of a good hearing. So if you have a weakness, how can we mitigate it? Because one of the things banks don’t like is surprises.” David Roust, relationship director and head of the recruitment industry team at Barclays, reckons that for “prudent banks”, there are several basics that must accompany any request to support a business. “It has to be a business we understand, a management team that we have met and understand, and a business plan that makes sense,” he says. “As a bank that supports the sector, we understand all the issues the industry faces.” As well as the banks, some industry watchers report anecdotally that more angel investors are beginning to appear on the radar, although there are no concrete figures to support this yet. Recruitment entrepreneurs who feel they can put a strong case to such an angel, and want to connect with potential investors, should do their research. Websites such as www. angelinvestmentnetwork.co.uk are good places to start. There are also seed and growth capital companies specialising in the recruitment sector, with the James Caan-founded Hamilton Bradshaw among the biggest names. Last year, James Caan also launched Recruitment Entrepreneur, a seed capital investment company that provides funding of up to £500k, plus a
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