Graphite Capital sells recruitment group for £234m

The London-based firm has delivered a good return ahead of a likely new fundraising process next year as its current Fund VII reaches the two-thirds deployed mark.

Graphite Capital has made its first exit of the year by selling NES Global Talent, an international recruiter group, to AEA Investors. The firm bought the company in 2006 for £70 million and sold it for £234 million, it said in a statement.

The exit multiple was undisclosed, but Mike Tilbury, a senior partner at Graphite, told Private Equity International “it was an excellent return”. The investment was made from the firm's £375 million Graphite’s Capital Partners VI 2003 fund.

Graphite was advised by Baird Investment Banking. “The auction was very competitive and AEA responded very quickly to sign the deal within a month of management presentations. Graphite has achieved an excellent return, which is much deserved,” David Silver, head of Baird’s European investment banking group, said in a separate statement. 

“In a difficult deal environment you need to sell your businesses well so this is good news for Graphite,” Tilbury said. “We have ended up with a good result and they [AEA] ended up with a fantastic business so it was a good deal for everyone,” he added. AEA declined to comment on the deal. It is understood it made the acquisition from its 2012 vehicle AEA Investors Fund V. 

Graphite turned the predominantly UK-focused business into a global player. Three quarters of its profitability is now coming from abroad, the firm said, and its earnings before interest, taxes, depreciation and amortisation have grown every year since 2006. Under Graphite’s ownership, the company has established 20 new offices, which brings the total to 32. NES Global Talent doubled its employee numbers to 450. The number of contractors on its books more than trebled to approximately 5000 in 62 countries.

In recent years, the financial track record has been exceptional, Mike Tilbury, said. “It managed its costs base very tightly, grew sales aggressively during the recession which off-set the market decline to a large extend and it therefore performed extremely well. There aren’t that many businesses that grew during the recession and for a recruitment business to grow during a recession is outstanding.”

Graphite has invested in the recruitment sector before. In 2007, the firm invested £100 million in Alexander Mann Solutions, a global recruitment process outsourcing company. In July 2010, it bought a £45 million stake in Teaching Personnel, a teaching staff provider business in the UK.

Graphite, which typically invests in business between £25 million and £200 million, is currently investing its £585 million Graphite Capital Partners VII 2007 vintage. The most recent acquisition from this fund is a £30 million investment in Explore Learning, a UK provider of tuition for primary school children, in August. It is understood the fund is now 65 percent deployed.

The firm declined to comment on fundraising. A source close to the matter told Private Equity International “it is obvious [Graphite] will be fundraising in the next year or so”.