Weathering the merger storm: Local employment agencies hope turbulence only temporary

To meet the evolving employment needs of this nation’s businesses, many players in the fast-growing temporary-staffing industry are rearranging their position via mergers, buyouts, expansions and newly formed companies.
As a result, this service-dominated, $55 billion-a-year industry is as boisterous as a game of musical chairs where the object is to maneuver for a place to settle when the music finally stops.
Here in Northern Colorado, the shuffle started a little more than two years ago, and it appears that the music is still playing.
SOS Staffing Services was one of the first new players to enter this area about two years ago. The then 22-year-old company opened a Fort Collins office about the same time it went public in June 1995, said Steve Randazzo, district manager.
Then, in 1996, the same year SOS made a second public offering, it bought 20 more independent companies, Randazzo said. That summer, SOS also opened the Greeley office.
“We’ll probably be in Cheyenne by the second quarter of 1997,” Randazzo speculated, noting that the company is growing internally at a 20 percent rate.
In February 1996, CoreStaff Inc. joined the local game with the purchase of Richard Keith’s AppleOne of Colorado company. This purchase set the stage for subsequent legal action between CoreStaff and the AppleOne franchise company.
Keith described CoreStaff as an acquisition-based company that “grew from zero to $700 million in less than four years,” mainly by aggressively acquiring new companies.
“But you can’t continue to buy companies at that pace forever,” he said, which suggests one reason the Houston-based corporation recently created the CoreStaff Franchise Group and picked Keith to head it up in Fort Collins.
Keith said franchising efforts initially will concentrate in the Midwest and Great Lakes regions.
Shortly after CoreStaff acquired AppleOne of Colorado, the AppleOne corporation re-entered the Northern Colorado scene and opened new offices in Greeley and Fort Collins.
Taking the franchise route is not new in this area. Express Personnel, owned by Mike and Kathy Egan, has been a franchise in Greeley since 1983 and recently expanded service to Fort Morgan.
“We have always felt that [franchising] offers the best of both worlds,” Kathy Egan said. “Each franchisee determines the nature of its market, hires its own people, picks its contracts and decides its own pricing.”
Yet franchisees receive company backup in training, computers, legalities, advertising, human resources and, very importantly, “the company maintains the line of credit and handles the cash flow,” Egan said.
On Call Staffing Services has elected to march to a different tune in the industry shuffle.
Betty Becker, who founded the independent Colorado company in 1978, recently joined On Call with six other independents to form the Staffmark Co.
Still On Call’s president, Becker explained that “the employment market has become more sophisticated, very savvy, and we [had] to keep up with the expectations of today’s market.”
In September 1996, Staffmark went public. In the new company’s first quarter, “We met our figures as anticipated, and we are in the acquisition mode,” Becker said.
Staffmark has 95 offices in nine states. Each has kept its original name and identity, yet benefits from the pooled resources and expertise of the others, Becker said.
As for the industry’s future, she “expects to see more merging and blending.”
The industry’s biggest international merger has been felt at the local level.
Adia SA, a Swiss-based company that began U.S. operations in 1972, completed its merger on Jan. 1 with Ecco SA, a French-based staffing company with U.S. operations in the East.
The new company, Adecco, will continue to operate former Adia offices in Fort Collins and Greeley, according to Susan Piper Butters, branch manager of Fort Collins’ Adecco office.
According to the trade publication, Staffing Industry Report, the combined 1995 revenues of Adia and Ecco were well more than $6 billion, making Adecco the world’s second-largest staffing provider in terms of sales. Only Manpower Inc. leads Adecco with 1995 sales of $6.9 billion, the Report said.
The arrival of the “big boys” brings up the question of whether the smaller, independents will be able to maintain their place in the market when the music finally stops.
The owners of two remaining independents in this area say they will, and they will also grow.
From her background as a legal assistant in employment law, Kate Wagner started Employment Solutions in Windsor in July 1994. The “incredible success” of that office opened the Greeley office in December 1995, and Greeley’s success opened the Fort Collins office in July 1996, Wagner said.
Wagner is “not interested in” mergers and buyouts. “We are proud of our local heritage and of being 100 percent minority-owned, so we plan to stay that way.”
Acknowledging the obvious benefits of “deeper pockets,” Wagner countered that her clients benefit from her freedom to make decisions based on their needs without the interference of corporate rules and regulations.
Absolute Employment is another independent in this area.
Sole owner Verna Brown opened the Greeley office five years ago after working in the industry for eight years. Optimistic about Absolute’s future, Brown is considering new offices in Colorado Springs, Boulder and Longmont and two additional ones in Denver by year’s end.
“We’ve had several offers for a buyout, but I’m just not at all interested,” Brown said. She also dismisses franchising as an option, “but in our five-year outlook, it looks like we may go national.”
In that regard, Brown pinpointed the Savannah, Ga., area because, unlike Colorado, that area’s high unemployment rate promises not only a larger pool of workers, but also a more diverse group than exists in Colorado’s current market.
“Colorado’s current market is hard,” Brown said. Where Absolute was booking 20,000 hours a week two years ago, it’s now booking 9,000. Part of the problem is Colorado’s low unemployment rate, Brown said.
Still, she is not ready to “throw in the towel. Such a cut could cause trouble if you haven’t forecast properly and managed your budgets and cash flow well,” she said.
Brown thinks welfare reform will “balance out the industry somewhat by providing more workers, although we won’t see anything with that for a couple of years.”
Brown closed her Fort Collins office because the city’s high ratio of staffing services to business clients was causing low billing rates and lower margins than her other offices were posting.
But, “since I closed Fort Collins, I’ve opened two in Denver, and they were profitable as soon as we opened the door,” Brown said.
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