What would Einstein buy?

I am sometimes asked what segments and sectors are most attractive for acquisition.  The wise, considered, sober answer, delivered with a thoughtful sigh while wiping ones glasses meditatively and looking into the distance, would be, of course, 'it depends.' 

But for the purposes here, I will go out on a limb and say industrial temp staffing.

Of course it depends on what will best dovetail with your current operation, what will create synergies, what your own management team is capable of managing it depends a lot on price as well.

But, everything else equal, if I had to pick an area that theoretically at least would seem attractive at the moment I would have to say: industrial temp staffing.  Here's why:

  • Over the last year or so, industrial has seen the worst revenue declines of any temporary staffing segment.  At the same time, industrial temp staffing firms are much more likely to be specialized in just that one segment than other staffing firms.  Forty-seven percent of industrial temp staffing firms generate a majority of their revenue from industrial staffing alone.  So there are many firms in this segment that have suffered disproportionately and with nothing to offset the declines; this suggests a lot of firms holding on by their fingers.
  • The manufacturing industry, industrial staffing's #1 customer, is highly cyclical.  We are very likely near the bottom of the current economic cycle, so business for major customers should soon begin improving.
  • Historically, industrial temporary staffing has bounced back earlier and with more vigor than other segments, so whenever a temporary staffing recovery does occur, industrial staffing will likely be among the first to benefit.
  • Industrial temp staffing firms are more likely to be located in HUBZones than most other types of staffing.  HUBZone status gets you extra points when bidding on government contracts, and now that government has put the spending pedal to the metal, there is great opportunity in pursuing government as a customer.

Again, industrial temp staffing is not a good fit for everyone, but it does have unique characteristics that suggest strong current opportunity for the right kind of purchaser.

As an aside, in another troubled time, I once sold a beleaguered small business and was damn glad to do so.  So if you make an advantageous offer to a troubled staffing firm, don't think yourself a vulture swooping down on some poor soul; you may well be enabling that person to walk away with their shirt and their good credit, useful things to have when one is trying to rebuild one's life after an unfortunate business decision.

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