Nottingham-based recruitment firm Staffline Group (STAF: LSE) today announced the acquisition of welfare to work and skills training services firm A4e for a total consideration of £34.5 million.

Andy Hogarth, Chief Executive of Staffline, commented: “We are delighted to be announcing today the acquisition of A4e. This is an exciting milestone in Staffline’s growth, considerably expanding the size and geographic reach of our Employability offering and will result in the combined business being one of the largest Work Programme providers in the UK.”

“The significant strengths of both businesses will be united and we are confident that our leading position will be a strong platform from which to develop our strategy, services and innovation. We look forward to creating a winning team and business, and delivering significant shareholder value.”

A4e made headlines last month when a number of ex-employees were convicted of fraud by the Crown Court, relating to a contract based in the Thames Valley back in 2011. Charges were brought in 2013 against nine people charged with a total 60 counts of fraud.

Last month, six of the perpetrators were given prison sentences of between 15 months and 40 months. Others were handed sentences but they were suspended for two years.

Speaking to Staffing Industry Analysts, Andy Hogarth addressed A4e’s reputational concerns head-on: “No, they don’t have the greatest reputation. But the good thing is that they had an internal whistle-blower who uncovered the wrongdoing. They called the DWP, who in turn called the Police. The company was subsequently audited to death and there was nothing else that smelled vaguely of fraud.”

“As a buyer that’s really good. DWP has confirmed that everything else was fine. What did get thrown up, however, was that their internal compliance wasn’t as good as it should have been. As a result they spent £8 million in the past three years improving that. Meaning that we’re getting a company that’s actually in very good shape.”

According to the Mr Hogarth there are no plans at this time to close any offices and, given that none of either companies’ contracts overlap, the vast majority of jobs are secure.

Andrew Dutton, Group CEO of A4e, added: “We are today starting a new chapter in the history of A4e. Staffline is exactly the right fit for us: its ambitions, robust financial position and its people and business values will all support the combined business as we grow together and build on our position as a leading Work Programme provider in the UK.”

“A4e is now in the perfect ownership to both develop our customers and support our employer relationships and I wish the combined business every success in the future,” he concluded.

A4e is a profitable, cash generative business expected to deliver revenues of approximately £140 million, EBITDA of £13.8 million, and profit before tax of £10.2 million for the year ending 31 March 2015.

According to the acquisition announcement, Staffline has agreed to acquire A4e’s entire issued share capital for £23.5 million and will assume A4e’s net debt of £11 million. Following the acquisition, Staffline will become one of the largest Work Programme providers in the UK, in terms of the number of jobseekers supported and contracted regions services.

On completion of the acquisition, A4e will be integrated with Staffline’s existing Welfare to Work business, Avanta. Rod Jackson, Managing Director of Avanta, will lead the combined business, which will be rebranded “PeoplePlus” over the coming months.

Following the announcement, Staffline’s share price rose strongly by 18.9% to £9.55, an increase of 22.8% compared with a year ago. Based on its current share price, the company has a market value of £222.8 million.