Copyright © March 12 BDO LLP. All rights reserved. M&A IN THE RECRUITMENT SECTOR – AN ADVISER’S PERSPECTIVE KIERAN LAWTON & JAMES FIELDHOUSE OCTOBER 2012

Page 2 WHAT WE WILL COVER M&A in the recruitment sector – an advisors perspective M&A activity in the sector Valuations How to build an attractive proposition Preparing for a sale process

Page 3 DEAL METRICS UK deals in 2012 M&A in the recruitment sector – an advisors perspective Who were the buyersWho were the sellers Population of 28 deals

Page 4 SPREAD OF DEALS BY SECTOR M&A in the recruitment sector – an advisors perspective UK deals in 2012

Page 5 KEY DEALS IN 2012 M&A in the recruitment sector – an advisors perspective £15m July 2012 Management buyout of backed by Key Capital Partners Management buyout backed by Key Capital Partners EBITDA to March 2012 was £2.4m so historic multiple of 6.3x. Debt financing provided by the Co-operative Bank. £23m May 2012 Management buyout of by MMGG Acquisition Management buyout and de-listing from AIM The transaction represents an EBITDA multiple of 4.1x Debt financing was provided by Barclays. £140m June 2012 Acquisition of by Equistone Partners Europe Sale by a UK private vendor to UK Private Equity EBITDA to August 2011 was £14.2m so historic multiple of 9.8x. £234m October 2012 Sale of by Graphite Capital to AEA Investors Graphite backed the £86m management buyout in 2006 The transaction represents an estimated EBITDA multiple of 12.4x £n/d October 2012 Sale of by Palatine Private Equity to LGV Capital Palatine backed the £30m management buyout in 2009 Debt financing of £61.5m was provided by HSBC.

Page 6 Enterprise Value plus cash less debt (includes invoice discounting) = Equity value In 'asset light' companies, valuation focuses on the earnings/cash generation potential EARNINGSMULTIPLE SIMPLE VALUATION OF YOUR BUSINESS M&A in the recruitment sector – an advisors perspective ENTERPRISE VALUE x=

Page 7 MAXIMISING THE VALUE DRIVERS EARNINGS MULTIPLE CASH GENERATION M&A in the recruitment sector – an advisors perspective Presentation is key ‘Quality’ of the earnings: –Sustainable –Contract element. Cost of investment: –In branches –In new teams –New consultants –New systems Run-rate of earnings/growth prospects. Recruitment sector valuations –Quoted multiples –Other transactions M&A activity in the sector Sector dynamics − high growth, niche etc Scale − Not dependent on key individuals, breadth of management. Business sold on a debt free/cash free basis Balance between investing for future growth and short-term cash generation Efficient tax planning − corporation tax, indirect taxes, employee tax.

Page 8 ESSENTIAL STEPS M&A in the recruitment sector – an advisors perspective Withstand sale process Anticipate buyers needs Create confidence Systems − robust and scalable. Business Plan Add backs/exceptionals EBITDA bridge historic to forecast. Exit − personal/ strategic Partial exit. Succession Aligned Incentivisation. Planned sale process Competitive tension Targeted buyers. Working capital Taxation Contingent liabilities. Profitability /growth RationaleInformation Buyers and sale process Cash generation People VALUE MAXIMISATION

Page 9 SUMMARY Buyers Know your market and targets Understand the people agenda – you’ve bought the company, how about the people? What do you bring that will enhance your chances of success Can the synergies really be achieved and enhance value? Sellers When do you want to sell? Plan your strategy for the business accordingly Be realistic in your expectations –A growth company is more valuable than a lifestyle company –Exit or retirement sales can be difficult to achieve without sales and succession planning A lot of businesses have three year exit plans. M&A in the recruitment sector – an advisors perspective

Page 10 Listed Recruitment Research EV / TurnoverEV / EBITDA Company NameFYECurrency Share price 28 Sep12 Current Mcap Enterprise ValueHistoricCurrentForecastHistoricCurrentForecast Michael Page International 31-Dec-11 GBP ,077.91, x 0.97x10.7x12.3x11.3x Hays 30-Jun-12 GBP ,071.81, x0.34x0.32x8.0x7.9x7.3x Sthree 27-Nov-11 GBP x0.54x0.50x8.3x7.7x6.1x Robert Walters 31-Dec-11 GBP x0.26x0.25x7.7x10.1x7.7x Staffline Group 31-Dec-11 GBP x0.17x0.16x5.5x5.4x4.6x Matchtech Group 31-Jul-11 GBP x0.18x0.17x8.5x6.7x5.7x Harvey Nash Group 31-Jan-12 GBP x 0.09x4.8x5.2x4.9x Networkers International 31-Dec-11 GBP x0.22x0.19x5.4x5.0x4.6x Hydrogen Group 31-Dec-11 GBP x0.17x0.16x6.2x4.8x4.0x Interquest Group 31-Dec-11 GBP x 0.13x4.6x5.2x3.3x Empresaria Group 31-Dec-11 GBP x 0.10x3.7x3.3x3.0x Servoca 30-Sep-11 GBP x0.17xNA3.3x12.1xNA Overall high 1.03x 0.97x10.7x12.3x11.3x Overall low 0.10x 0.09x3.3x 3.0x Overall average 0.29x 0.28x6.4x7.1x5.7x Overall median 0.20x0.18x0.17x5.9x6.1x4.9x Over £100M EV High 1.03x 0.97x10.7x12.3x11.3x Low 0.27x0.26x0.25x7.7x 6.1x Average 0.55x0.54x0.51x8.7x9.5x8.1x Median 0.45x0.44x0.41x8.1x9.0x7.5x Sub £100M EV High 0.21x0.22x0.19x8.5x12.1x5.7x Low 0.10x 0.09x3.3x 3.0x Average 0.16x 0.14x5.2x6.0x4.3x Median 0.16x0.17x0.16x5.1x5.2x4.6x APPENDIX: LISTED COMPANY MULTIPLES M&A in the recruitment sector – an advisors perspective