Institutional investors and company executives like to work with people who know what they’re doing. A flashy idea might be
cool, but a solid strategy and the credentials to back it up are where money gets made.
Allan Hartley, the CEO of
Bay Talent Group Inc. (BTG) (TSX-V:HIRE, Forum), knows what he’s doing. The staffing and consulting veteran has been in the industry for more than 35 years, spending most of it in major, publicly-traded staffing firms. Now he’s looking to utilize that experience with a new play in staffing that already has investors excited.
What’s attractive about BTG is that it is a unique company in a Canadian staffing market that hasn’t seen its like before. The Company is an innovative, two-fold business that bring together talent acquisition and technology, but at its core BTG isn’t a recruitment agency, it’s an acquirer of recruitment agencies.
Hartley attracted attention because of his experience in consolidating staffing firms to exponentially increase their potential (and value). A directed acquisition strategy saw the staffing firm
Staffing 360 Solutions Inc. (
NASDAQ:STAF), where Hartley was the CEO from 2012 until 2014,
achieve US $130 million in revenue in just one year.
In addition to his acquisition experience, Hartley is well-versed in public companies and bringing them to market. During the mid-2000’s, he launched the firm
AccountAbilities Inc. and as President, took it public for a US $200 million valuation. Before that, he also was a senior vice-president at
Kforce Inc. (
NASDAQ:KFRC) and a manager at the largest office of
Robert Half International Inc. (
NYSE:RHI), two of the largest staffing firms in the US.
What this means for BTG is that Hartley knows what to look for. It’s this rare combination of vast experience and specific strategy that is the BTG story in a nutshell, and what makes the company such an attractive entry for investors into the staffing market.
Stockhouse Editorial recently spoke with Allan Hartley on how BTG will approach its acquisition strategy, and how his experience is ripe for the Canadian market. As the Company’s CEO himself puts it, consolidating staffing firms at this point is basically in his blood.
“Consolidating staffing firms is sort of in my blood. I have big company experience and was actually an owner and took a company public in the sector. Because of all the staffing experience that I have, I’ve been able to come up with different strategies to really differentiate ourselves from the herd. So we have programs that we’re putting in place and technologies that we’re going after that make us a compelling story for investors. And it works in our favor that nobody’s really done this in Canada, which means that BTG can.”
The staffing market might be new to some investors, but those that understand the field know that there is a lot of money to be made in the staffing market in Canada. The 25 biggest staffing firms in the country generated a combined $5.5 billion in revenue in 2018 and account for 58% of the total market, yet no firm holds more than 8% of the market share in Canada, making it ripe for consolidation (Source -
SIA: Largest Staffing Firms in Canada | October 18, 2019).
(Image via Bay Talent Group)
Enter BTG’s carefully thought out acquisition strategy. The plan highlights two types of acquisitions, what the Company calls Cornerstone and Tuck-in Acquisitions, before working to integrate the acquired companies to maximize synergies and economics. The former targets established staffing firms with diverse client bases and wide regional coverage, while the latter focuses on higher margin niche staffing companies which can benefit from increased market penetration.
To start off, BTG has already established a strong base in Canada. The Company began by acquiring
PTC Recruiting in December of 2017, a Toronto staffing firm that specializes in finance and accounting staffing solutions. Since then it has added another major acquisition in July 2018,
Provision IT Resources. Both subsidiaries have brought in a combined $9 million in revenue over 9 months.
As its growth continues, BTG already has its sights set past Canada. Given Hartley’s experience in consolidating staffing firms in the US, it should come as no surprise that the Company is focusing on entering the $150 billion market (Source –
SIA).
The key for BTG’s growth, and for Hartley’s success in the past, is knowing where to look. Through his experience, the CEO has found a “sweet spot” for staffing mergers and acquisitions of firms with $10 - $20 million in revenues and a positive EBITDA. Considering that Toronto has hundreds of staffing firms alone by Hartley’s estimates, that narrow scope helps the Company look for directed acquisitions that drive growth.
Even further to the strategy, however, is a focus on firms that are prepared for the future. In the past, Hartley’s companies grew by aiming for a balanced ratio of contract offerings and permanent position placements. Right now, the firms that BTG considers part of the “sweet spot” for acquisitions lean more heavily towards contract placements, with about 70% of their business coming from contracts.
(Image via Bay Talent Group)
The simple reason?
Contract placements make a staffing firm recession resilient. In the US alone, Hartley estimates that about 40% of work is already done by contractors, but the game gets flipped upside down during a recession. During the 2008 recession, Hartley saw his permanent placements “fall off a cliff” because companies couldn’t afford to hire full-time staff, yet because there was a renewed focus on contracts, his company actually managed to grow.
Another key aspect of preparing for future growth is picking the right kind of staffing firms. That’s why BTG’s acquisition strategy includes a specific focus for firms in niche job markets that are either already in high demand, or on their way. In a rapidly technological world that includes IT, accounting, finance, and a bubbling demand for cybersecurity with the looming US 2020 election making it a hot-button issue.
In his interview with Stockhouse Editorial, Hartley explained that BTG has already seen success hiring in these fields. By consolidating different types of firms, the Company is able to find opportunities for horizontal growth that would otherwise be inaccessible.
“There's two ways we can really grow in the staffing industry: horizontally where we put more companies into more markets, and vertically where we sell all the verticals that we currently do. If we buy an IT company, we can go to their clients and say we have a sister company that places accounting people.
The biggest thing for us is that we're in sectors that are in demand. Accounting, biotech, biopharma, cybersecurity, even gambling in the US during a recession seems to do well. Just recently we placed a whole accounting department in a cannabis company in Toronto. There are different things that'll help us weather any kind of storm because something will come down the pipe.”
But what will elevate BTG is their particular focus on digital innovation. Through future acquisition of and investment in technology companies, they plan to redefine the industry with new A.I. and predictive analytics interfaces to streamline the talent acquisition space. Investors should take note that Hartley has been here before, and BTG’s management is developing creative initiatives that utilize its growing network to generate additional revenue.
(Image via Bay Talent Group)
Hartley and his team have a good sense of where the staffing market is headed, where its opportunities lie, and they created a tailored strategy for growth across Canada and the US. It’s a field that investors might not be familiar with yet, but as BTG’s CEO Hartley puts it in his interview with Stockhouse Editorial, staffing is
everywhere.
“Every company uses staffing, every company needs people. It’s not going to stop no matter what happens in the world, companies will still need to hire people. We have solutions that help promote that, and that’s really what we are, a great talent acquisition environment. It’s just that simple.”
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.