KKR sells Intelligence Holding to Temp Holdings for $716m

May 2013 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

US private equity firm Kohlberg Kravis Roberts & Co. L.P (KKR) announced in late March that it had entered into a definitive agreement with Japanese recruitment agency Temp Holdings Inc. for the sale of staffing agency Intelligence Holdings Ltd.

The deal, which is subject to customary closing conditions and regulatory approval from the Japan Fair Trade Committee, is believed to have an equity value of $537m and an enterprise value of $716m.

KKR acquired Intelligence Holdings in July 2010 from Tokyo-based Usen Corporation, a cable broadcaster and media content provider. KKR beat competition from fellow PE firms Carlyle Group and MBK, paying ¥32.5bn for the company.

Intelligence ranks 51st on the list of the world’s largest staffing firms, and is currently the sixth largest in Japan, according to data held by Staffing Industry Analysts.

Intelligence operates across a number of different markets, providing permanent job placement services under its ‘Doda’ brand, as well as online and classified job advertisement services under its ‘an’ brand. Intelligence also provides temporary staffing services and outsourcing services for the IT and business sectors.

The sale of Intelligence, which was founded in 1989, represents a solid return for KKR. The group estimates that Intelligence’s revenue rose 45 percent during the three years it spent within the KKR portfolio. Furthermore, the $716m price paid to KKR by Temp Holdings shows a handsome profit based on KKR’s initial, leveraged outlay of $365m.

Since the 2010 acquisition by KKR, Intelligence has increased its number of employees by 37 percent from 4370 to 5981. Intelligence has also grown its revenues by 45 percent, increased operating profit by 431 percent and has grown EBITDA by 170 percent.

In a statement announcing the sale, Mr Shusaku Minoda, managing director and chief executive officer of KKR Japan, said “Over the last three years we have built a highly successful partnership with Mr Takahashi and his team at Intelligence. Thanks to their incredible energy and vision, Intelligence has achieved very strong and sustained growth and profitability. The success of this partnership provides a firm foundation for our plans to further develop our business in Japan.”

According to the joint statement released by the companies, the newly amalgamated firm is expected to have revenues of more than $3.37bn. The group will also have earnings before EBITDA of more than $220m and employ over 10,000 staff.

Temp Holdings, the second largest staffing company in Japan, plans to use the Intelligence brand to bolster its advertising and recruitment businesses while also expanding its presence across all of Asia. Temp Holdings is also hoping to mount a challenge to the domestic dominance of Recruit Holdings Co Ltd.

“Intelligence has grown rapidly as a comprehensive recruitment services provider. In particular, by fully utilising the skills and expertise of KKR over the past few years, Intelligence has achieved a large improvement in the performance and profitability of each of its businesses and significantly strengthened its position in the recruitment services business,” said Yoshiko Shinohara, chairman and president of Temp Holdings. “We believe labour flexibility and mobility will be an important part of improving the competitiveness of Japanese companies and through this partnership we aim to support our customers’ sustained growth by stimulating inter-industry labour mobility, provide stable employment opportunities to jobseekers, and thereby contribute to job creation and better serve our customers,” he added.

According to the joint statement, the HR services market in Japan has grown enormously over the last 25 years as established employment patterns have evolved and developed, and companies have looked to restructure and expand their businesses globally.

Richard Summerfield