Compass Consolidates Staffing Cos. in Southeast –

Betting on the growing importance of temporary staffing to the light-manufacturing and health-care industries, The Compass Group International LLC last month acquired Columbia Staffing and Columbia Health Care Services, and currently is eyeing add-ons throughout the Southeast.

The transaction, valued at approximately $15 million, was structured with 50% equity. Debt was provided by BankBoston.

Compass’s staffing holding company, called The Kilgore Group, is based in Columbia, S.C., and has branches throughout South Carolina and Florida. Kilgore specializes in “vendor on premise” temporary staffing, by which factories and health-care concerns outsource the management of their fluctuating employee needs to an on-site specialist.

Kilgore’s clients include Fortune 1,000 companies. It had 1998 revenue of more than $30 million.

According to Joe Massoud, president of Compass, the temporary staffing industry currently is out of favor in the public and private markets, despite showing steady growth of between 8% and 12% over the past several years. He said such companies currently sell for multiples of between 7 and 9 times earnings before interest, taxes, depreciation and amortization (EBITDA) in the public markets, while private staffing companies go for between three and six times EBITDA. The industry also is extremely fragmented, Massoud noted.

Other firms that recently have acquired staffing companies include Charterhouse Group International (BUYOUTS Aug. 16, p. 11) and Nassau Capital (BUYOUTS, April 5, p. 16).

Compass invests in mature industries that have limited risk of technical obsolescence. “We want to be able to understand the sector in a relatively short amount of time,” Massoud said.

Based in Westport, Conn., Compass has access to $110 million in equity from a single limited partner that Massoud declined to name, adding it was a foreign philanthropic trust. Compass invests capital for the trust in the U.S. and abroad, he said.