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US – On Assignment Buys Apex for $600 Million

21 March 2012

On Assignment Inc. (NASD: ASGN) is buying Apex Systems Inc., one of the largest and fastest-growing suppliers of information technology staffing. Privately held Apex ranks No. 6 on Staffing Industry Analysts’ 2011 list of largest IT staffing firms. Apex has also qualified for the list of fastest-growing U.S. staffing firms every year since 2005.

On Assignment will pay $600 million to acquire all of Apex and retire its debt. The price includes $383 million in cash and newly issued stock valued at $217 million.

Apex posted revenue of $705.2 million in 2011.

On Assignment, based in Calabasas, Calif., posted revenue of $597.3 million in 2011, up 36.3 percent from the previous year. It recorded IT and engineering revenue of $266.7 million in 2011, an increase of 49.3 percent from the previous year.

On Assignment ranks No. 30 on the list of largest IT staffing firms based on 2010 revenue. It provides IT services through its Oxford Global Resources brand. On Assignment also provides healthcare, clinical and engineering staffing.

The Apex deal comes after several years of discussions, said On Assignment President and CEO Peter Dameris. Those discussions began after On Assignment did a deep strategic analysis of its own business including looking at the viability of IT staffing.

Dameris said both On Assignment and Apex share similar cultures but do not compete for the same business.

“We both have very high performance-driven cultures … they are both young vibrant organizations,” he said. However, “there’s no sales channel conflict there, people are focused on market share.”

The deal was built with the view toward strategic top-line revenue growth but zero synergy savings, Dameris said.

Richmond, Va.-based Apex will become a division of On Assignment and continue to operate as it has in the past. Set to remain with the On Assignment and have representation on its board are Apex’s three founders: Jeff Veatch, Win Sheridan and Brian Callaghan. Apex Chief Operating Officer Rand Blazer and CFO Ted Hanson will also remain in place.

Apex was founded in 1995 and has 49 locations in the U.S. Its services included contract IT professionals, temp-to-perm and direct hire as well as recruitment process outsourcing (RPO), statement of work and specialty skill sourcing.

Apex’s average bill rate is $60 per hour, and it presently has approximately 16,500 workers at 1,200 clients. Apex receives about 60 percent of its revenue through vendor management systems (VMS). Oxford Global presently has approximately 1,400 temporary workers at clients. Oxford Global does not have revenue through a VMS.

On Assignment estimated revenue for the second half of 2012 will be between $775 million and $805 million with the acquisition of Apex. It forecasts gross margin of 30 percent to 31 percent for the second half of 2012.

The deal is expected to close in May and is subject to approval by On Assignment’s shareholders.


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