Older Workers still on the Job Working

February 4th, 2013

A new analysis of Census data reveals that the share of U.S. citizens 65 and older in the labor force has risen from 12.1% in 1990 to 16.1% in 2010. The percentage of 65-plus women workers rose more than 4 percentage points to 12.5%, compared with a 3.2 percentage point increase for men to 20.8%. “As with all age groups, the increase in labor force participation of women has been a driving factor for this overall trend,” says Braedyn Kromer, an analyst in the U.S. Census Bureau’s Labor Force Statistics Branch. More than 44% of workers 65 and older worked full time year-round. The growing presence of older Americans in the work force is likely to continue. The Census Bureau projects a 67% increase in the 65-and-older population between 2015 and 2040, when one in five Americans will be 65 or older.

Older Workers hurting Union Membership

The U.S. Bureau of Labor Statistics announced on Jan. 23 that the union membership rate in America continued its long collapse in 2012, falling to 11.3% of all workers, its lowest level since the 1930s. Thirty years ago, 20% of all workers were in unions. Things stand to get much worse for unions in the coming years, as union workers age. Today, almost a quarter of union members are older than 55, up from around 15% in 2002.

Middle-aged workers are turning into old workers as the baby boomers head towards the last decade or so of their careers. Also, the unions are failing to add younger members (or, alternatively, those young members are being laid off by local governments and factories). Unless unions somehow become adept at organizing workers in their 20s and 30s soon, they stand to lose another sixth of their membership to retirement in the next decade.

For more information or a complimentary confidential discussion on any Staffing M & A subject, contact: Bob Cohen at 416-229-6462 or Sam Sacco at 910-509-0691.

 We can also be reached at bob@racohenconsulting.com or sam@racohenconsulting.com.

Sam and Bob have successfully completed over 135 staffing industry transactions. Visit our website for more articles and information at:    www.racohenconsulting.com

How to Value your Staffing Business

June 18th, 2012

Most profitable staffing firms will be valued as a multiple of adjusted EBITDA, which is Earnings before Interest, Taxes, Depreciation and Amortization. Some valuations include working capital (the difference between current assets less current liabilities) as part of their multiple particularly in Professional Staffing Service sectors.

So when discussing multiples it is vital to know what the Buyer is or isn’t including in their multiple number to be sure you are making fair comparisons between buyers. Another area often open to interpretation is which of your adjustments will be acceptable to a given Buyer as stated. In other words and as an example, there may be an adjustment (add back) to normalize the owner’s compensation with a replacement amount i.e. the owners compensation package is $500,000 annually while a replacement package cost is believed by the seller and his/her Advisor that the appropriate replacement cost should be $150,000 per annum. One specific Buyer may accept this figure and allow an add back of $350,000, while another Buyer may believe the replacement cost is closer to $200,000 and a third buyer could argue that they feel they would need to pay $250,000 to hire a similarly qualified replacement manager in that market.

The bottom line is that the multiple is just an expression in dollars that is used to arrive at the appropriate valuation of the business. So, one Buyer’s multiple of 5X EBITDA could represent fewer dollars than a different Buyer’s multiple of 4X EBITDA. This is why it is important to truly understand what the multiple means for each Buyer.

 An experienced Staffing Industry Advisor can assist you in many ways to ensure you maximize the valuation of what is often your largest asset.

To determine the EBITDA of your business:

Start With: Earnings Before Taxes
Exclude: Interest Expense, Financing Cost, Depreciation, Amortization, Donations, Interest Income, Gains or Losses on Asset Sales
Remove: Unusual Professional Fees (i.e., Acquisition, Divestures, One Time, or Personal)
Normalize: Management Compensation to Market Value (Salaries, Wages, Bonuses, Perks, Travel, Entertainment, Automobile, Insurance, Management Fees, etc.)

 

Note–Not all changes bring EBITDA up, some may bring EBITDA down.

There are other methods of determining the value for less profitable or newer staffing operations which are often expressed in a percentage of annual gross margin dollars generated.

For more information, contact Bob Cohen at 416-229-6462 or Sam Sacco at 910-509-0691. We can also be reached at bob@racohenconsulting.com or sam@racohenconsulting.com.          

Sam and Bob have successfully completed over 130 staffing industry transactions. 

There are many more articles on our website at: www.racohenconsulting.com/resources  and Online Archives.

 

Competitive Factors in Privately-Held Companies

April 26th, 2012

The following * factors may have a significant impact on the value of a privately-held company, but they are normally not applicable to the value of a publicly-held firm. Most of them are stand-alone factors that have to be taken into consideration by a prospective purchaser, especially a strategic one.

Most are not relevant if the subject company is acquired by a public company or a much larger company. However, when this is not the case, these factors will come into play.

They should be considered by buyers and, of course, sellers in considering or setting the price of a business.

  • Lack of access to capital
  • Ownership structure and stock transfer restrictions
  • Company’s market share and market structure of the industry
  • Depth and breadth of management
  • Heavy reliance on individuals
  • Marketing and advertising capacity
  • Breadth of products and services
  • Purchasing power and related economies of scale
  • Customer concentration
  • Vendor and supplier relations
  • Distribution capability
  • Depth, accuracy, and timelines of accounting information and internal control
  • Condition of facility and upcoming capital expenditure needs
  • Ability to keep pace with technological changes
  • Ability to protect intellectual property
  • Increasing threat of foreign competition
  • Litigation, environmental concerns, and adverse regulatory issues