The ‘buy-and-build’ strategy is one often used by private equity firms looking to create value. It’s simple: find a core business with strong management, scalable USPs and good processes – then look for acquisition opportunities to bolt on, opening up new markets and driving down costs as the business scales.
And that’s precisely the model Gareth Stanger was hired to put in place at Recruitment Investments at the end of 2018. The business had a strong long term acquisition strategy from the beginning and planned to purchase a number of established recruitment businesses. As Acquisition and Investment Director, Gareth’s mission was to purchase five or six established recruitment businesses – where an owner was looking to exit, or was facing financial challenges – and use the team’s expertise to cement them as profitable subsidiaries with some centralised operations.
“The aim was to build up to a £20m turnover over the course of 2019, supported by an external investor and a finance partner,” explains Gareth. “So we met with a number of financiers, to gauge their interest and appetite for what we had in mind.”
ABN AMRO Commercial Finance had worked with Gareth at a previous recruitment business, so there was an established relationship – and a very good understanding of both the strategy and the business model. We provided an outline of what we could do and an indicative structure of a group financing structure, which was a key consideration for them.
An invoice discounting package was the core of the deal, because it would evolve with every acquisition they made, giving them a much freer hand to fund expansion. That’s important: ABN AMRO Commercial Finance aims to be every client’s financial wingman – which means being able to stay alongside them however fast and in whichever direction they need to turn, or however high they want to climb.
Invoice discounting was ideal in this case because it unlocks funding from any business model where debtors are the main asset. “We chose ABN AMRO as preferred finance partner as they have the scale of operation to suit our long-term plans,” says Gareth. “They showed a willingness to support and grow their lending to back our aspirations – whereas some of the other providers faced internal group size restrictions, which meant we couldn’t be sure how far they’d take us.”
The first acquisition backed by the new arrangement was Gill Cooke Personnel. Recruitment Investments also set-up a company, Professional Staffing Services, in July 2019, which was also backed with new finance. The Covid-19 pandemic did nothing to dent the strategy – and, in fact, the group has taken the opportunity to further consolidate in its market, acquiring Next Recruitment in March, Rugby Recruitment Services in May and Champion Employment in June 2020. Plans are now in place to grow to a conglomerate with a combined turnover of £40m.
In July, a renewed £4m Group Assured Confidential Invoice Discounting solution meant Recruitment Investments was able to push on with their plans. “The team at ABN AMRO Commercial Finance kept the process organised with excellent communication every step of the way,” says Gareth. “This new funding solution means we’re able to fully focus on our continued business growth.
“We now have a seamless service in terms of cash flow: uploading invoices and drawing down weekly cash flow,” he continues. “There’s a very swift, robust process in place which gives us confidence that the right funds will be in the right place at the right time for our ongoing acquisition strategy. ABN has delivered over and above: as the company has grown, the cost of borrowing has reduced, boosting profitability. And from a functionality point, the ABN customer portal is extremely user friendly.” We call that a win-win, opening up space for our clients to succeed.
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