Despite the tough economic conditions of recent years, private equity investors in the staffing industry are earning attractive returns, boosting private equity interest in the sector, according to significant investors.

Following Palatine Private Equity’s exit from international oil & gas recruiter Air Energi in October, managing partner Garry Tipper told Recruiter that the private equity firm “made three times our money out of it.”

Palatine’s original investment in 2009 was £10m when Air Energi was valued at £30m. Tipper revealed that Palatine had received “quite a few approaches” for their stake before selling it to LGV Capital.

Meanwhile Tristan Ramus, executive chairman of Human Capital Investment Group (HCIG), told Recruiter that his portfolio has returned compound growth of 20% for the last five years. Ramus said this sort of performance encouraged further investment. HCIG earlier this month took an 83% stake in accountancy, finance and professional recruiter SF Group, bringing to 28 its investments in staffing businesses. “You create an interesting story for people who are interested in investing because what are the alternatives for such a return on capital,” said Ramus.

Tipper said that, following the recent deals involving Air Energi and NES, which was sold to private investment vehicle AEA Investors, staffing businesses most likely to be of interest to private equity were global players operating in similar sectors such as utilities or telecoms requiring technical skills with organic growth opportunities. “This was either because the major players have grown, or where [client] companies are outsourcing their staffing requirements,” he added. 

However, Ramus contended that outside financial services, which was “unattractive”, there was a wider appetite from private equity. “People do want to buy into growth sectors, linked with strong management,” he said.

Tim Evans, managing director at Boxington Corporate Finance, added: “ It is tempting to say that the NES and Air Energi deals, two large deals coming so close together, mark a turning point in the private equity appetite for recruitment deals.

“However, if you look more deeply, both were well above average businesses in the eyes of private equity market – both having real stability though scale, resilient cashflows with which to raise debt, serious overseas footprints underpinning growth, and senior management teams highly trusted by institutional investors on account of their buyout track records.”