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US - On Assignment buys two firms; sells allied unit to Cross Country

December 03 2013

On Assignment Inc. (NYSE: ASGN) acquired information technology recruiting firm CyberCoders Holdings Inc. for $94 million in cash plus a possible earn-out of $11 million. On Assignment also acquired physician staffing firm Whitaker Medical LLC for $17.1 million in cash and earn-out of $5 million. In addition, the company sold its allied healthcare staffing business to Cross Country Healthcare Inc. (NASD: CCRN) for $28.7 million.

The CyberCoders acquisition is expected to close early this month. CyberCoders' estimated 2013 revenue is $55 million with an EBITDA margin of approximately 25 percent. On Assignment estimates its acquisition of CyberCoders will increase its mix of permanent placement revenue to more than 4.5 percent of consolidated revenue — the percentage of perm placement is presently at 1.7 percent. It will also result in an estimated expansion in consolidated gross margin of 175 to 200 basis points.

CyberCoders is based in Irvine, Calif., and has offices in Los Angeles, Boston and New York. It has a team or more than 200 recruiters that place middle- and senior-level professionals with IT, healthcare and life sciences skills in permanent positions with a majority of its revenue in IT. The firm includes a proprietary parsing software for recruitment that allows it to target high-value contacts.

CyberCoders was founded in 1999.

The CyberCoders brand will continue as a division of On Assignment. In addition, CyberCoders founder and CEO Heidi Golledge and Chief Technology Officer Matt Miller will remain with the company. Golledge will report to On Assignment Chief Operating Officer Michael McGowan.

“We believe that On Assignment’s more than 600-person sales team will accelerate CyberCoders’ growth by sharing with them the permanent placement leads that come through our Apex, Oxford, healthcare and life sciences divisions,” On Assignment President and CEO Peter Dameris said in a press release. “These are leads that historically we have not pursued or aggressively worked on, and are not easily filled by our existing staff.”

The businesses are complementary with little integration risk, Dameris said.

“The acquisition will also allow us to better serve our customers since we will now be able to not only meet their staff augmentation needs, but also provide them with permanent placement services on a contingent basis,” he said. “As a result, we believe that CyberCoders complements our current service offerings across all the On Assignment divisions quite well.”

CyberCoders was acquired from private equity firm Riordan, Lewis & Haden.

On Assignment also acquired Whitaker Medical, a Houston-based provider of physician staffing with offices in Houston; Atlanta; Austin, Texas; and Huntsville, Ala. Whitaker has estimated 2013 revenue of approximately $27 million. It will become part of On Assignment’s VISTA Staffing Solutions business.

Whitaker receives 30 percent of its revenue from the advanced practice area, On Assignment reported in a conference call with analysts.

In addition, On Assignment sold its allied healthcare division to Cross Country Healthcare. The allied business accounted for approximately 2.5 percent of the company’s consolidated revenue. The sale did not include On Assignment’s health information management practice, which will become part of its Oxford Healthcare IT group.

On Assignment will retain the allied health business' working capital of approximately $3.6 million.

“As we evaluated the allied healthcare staffing market, it became clear to us that it would be difficult to get this business unit, which is a tremendous asset and performs important and high-quality work, to the scale they need to be at On Assignment,” Dameris said in a press release. “We felt that Cross Country, which has a larger share of this market and deeper penetration into acute care facilities, can grow this business and allow it to flourish and would therefore be a better home for its employees and the unit.”

The allied business is expected to generate revenue of $41 million in 2013. It has 84 branch-based employees, and key managers will remain with the business, Cross Country reported.

“The acquisition of On Assignment's Allied Healthcare staffing division expands our local market presence and customer base, giving us the ability to leverage current and new client relationships, and it greatly expands our national footprint,” Cross Country President and CEO William Grubbs said in a press release. “This acquisition fits with our stated strategy and is a perfect complement to our existing lines of business, both from a geographic and staffing specialty perspective.”

Staffing Industry Analysts’ lists of largest staffing firms rank On Assignment as the 13th-largest U.S. staffing firm overall and the 10th-largest allied healthcare staffing provider. Cross Country ranks as the 15th-largest provider of allied healthcare staffing.

One of On Assignment’s last major deals was its purchase of Apex Systems Inc. for $610.8 million in May 2012. Apex provides IT staffing for the middle market while On Assignment’s Oxford division serves the high-end IT market. On Assignment also sold its travel nurse division for $31.0 million earlier this year.

On Assignment is based in Calabasas, Calif.

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