HireQuest Acquires TEC Staffing Services

December 12, 2023 – HireQuest Inc., a NASDAQ-traded national franchisor of on-demand, temporary and commercial staffing services, has closed the acquisition of Fort Smith, AK-headquartered recruiting company TEC Staffing Services. Simultaneously with the closing of the acquisition, HireQuest closed the sale of all TEC’s offices throughout Northwest and Central Arkansas to franchisees and completed their conversion to HireQuest’s Snelling franchise model. TEC generated over $34 million in total revenue for the trailing 12-month period ended September 30, 2023.

“TEC has been a premier provider of staffing services to the employers and workers in Northwest and Central Arkansas for over 40 years,” said Rick Hermanns, president and CEO of HireQuest. “We have some great teams of our existing franchisees partnering with members of TEC’s leadership and we’re excited for the opportunity they have to continue serving the region as part of the Snelling franchise family.”

HireQuest’s current operating infrastructure is sufficient to support the acquired offices and the company expects any incremental SG&A expense in the fourth quarter of 2023 and beyond to be minimal. As with past acquisitions where HireQuest converts acquired operations to franchises, the company recognizes either a one-time accounting loss or a one-time accounting gain in the period that it sells those operations to a franchisee. HireQuest anticipates it is likely to recognize a notable one-time accounting loss resulting from the conversion of TEC’s operations to franchises in the fourth quarter of 2023.

HireQuest is a nationwide franchisor that provides on-demand labor and commercial staffing solutions in the light industrial, blue-collar and commercial segments of the recruiting industry for HireQuest Direct, HireQuest, Snelling and Link franchised offices across the U.S. Through its national network of over 210 franchisee-owned offices in more than 35 states and Washington, D.C., HireQuest provides employment for more than 60,000 individuals annually that work for thousands of customers in numerous industries including construction, light industrial, manufacturing, hospitality, clerical, medical, dental, travel, and event services.

Past Acquisitions

Late last year, HireQuest acquired certain assets of MRINetwork, a global executive recruiting network headquartered in Delray Beach, FL, for approximately $13.5 million before working capital adjustments. The assets include MRI’s 232 franchise offices in the U.S. and internationally, which generated approximately $283 million in systemwide sales and standalone adjusted EBITDA of $1.9 million for the trailing 12-month period ended Sept. 30.

Related: Hunt Scanlon Media Launches M&A Advisory Service for Recruiters

“MRI is recognized as one of the top permanent placement executive search and professional staffing networks in the U.S.,” said Mr. Hermanns. “The addition of MRI as a franchise offering for executive search provides HireQuest with immediate scale in the segment and is highly complementary with our existing HireQuest direct and Snelling offerings. For more than 50 years, MRI’s franchisees have provided their clients with exemplary service, we are looking forward to providing them with additional tools and support they need to grow that success in the future.”

The Hot M&A Market for Executive Search Expected to Continue
Significantly more U.S. chief executives plan to pursue deals compared with their global chief counterparts, according to the newly-released U.S. CEO Outlook survey from EY. A full 63 percent reported they will pursue an M&A deal in the next 12 months, much higher than the 46 percent of CEOs globally who plan to pursue M&A. This fairly robust U.S. number may in part reflect a recent easing in asset valuations as well as pent-up demand.

Private equity firms, which have slowed their deal pace in recent months, are even more likely to pursue an acquisition, with 69 percent of private equity portfolio company CEOs saying they would pursue M&A. Across U.S. sectors, a majority of CEOs in financial services, consumer products and retail, advanced manufacturing and mobility (AM&M), and technology, media, and telecoms (TMT) plan to pursue M&A. Interestingly, joint ventures are very high on the U.S. CEO agenda: 73 percent plan to pursue JVs or strategic alliances, arguably the more recession-proof options.

“I’ve spent over 27 years as an MRI franchisee and became its CEO three years ago with a goal of carrying on the innovation established by our original founder, Alan Schonberg,” said Bert Miller, president and CEO of MRI. “Through this time, we’ve successfully guided the organization through a digital transformation to prepare the business for the future and help our franchisees build real businesses that also happen to be search firms.”

HireQuest also acquired Northbound Executive Search in New York City. Founded in 2010, Northbound provides executive placement and short-term consultant services primarily to blue chip clients in the financial services industry. “The acquisition of Northbound continues to build out HireQuest’s offerings in the higher margin executive placement and short-term consultant segments,” said Mr. Hermanns. “The company is a natural fit for our growing family of brands and we are excited that Northbound’s founders, Rachel and Greg Feder, will be staying on to lead Northbound into its next chapter.”

“With this partnership, Northbound has the ability to draw from an organization that will help to fuel our next stage of growth,” said Mr. Feder, managing partner. “As managing partners of Northbound, we will continue to operate the business on a day-to-day basis and our teams will continue to focus on providing a premium level of service to our clients.”

Related: Will Hot M&A Recruiting Market Cool and Reset Valuations

Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Executive Editor; Lily Fauver, Senior Editor – Hunt Scanlon Media

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