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Most of the recruitment industry would have heard that the legendary duo of Geoff Morgan   and Andrew Banks   have announced their intention to delist Talent2 and take it back into private ownership. This will occur via a share buyback funded by, what will be a 50/50 joint venture between their private investment vehicle Morgan & Banks Investments   and   Allegis  , a big US based recruitment firm.     

Prompted by the dramatic slump in the Talent2 share price after a profit warning late last year, Morgan and Banks are, yet again, poised to buy back their own business in challenging economic times. In the early 1990s they bought back the original Morgan & Banks business from Select (UK) for about 3% of what they sold it for, only a few years earlier.   

Talent2 will join a long list of recruitment companies who were once publicly owned, and are now no longer listed, thanks to takeovers, private equity buyouts or liquidation. Companies such as Julia Ross  , Recruitment Solutions  , Management Recruiters Australia  , Catalyst   and peoplebank  , spring to mind.   

When Talent2 departs the ASX board, there will be eight recruitment companies remaining with little, if any, chance of that number increasing.   

Skilled   has the recruitment sector’s largest capitalisation (currently $525 million), which is tiny when you consider the ASX’s 100th largest company, Consolidated Media  , has a capitalisation ($1.8 billion) more than 3 times the size of Skilled’s.   

I suspect Talent2’s departure from the ASX spells the beginning of the end for recruiters as ASX listed companies. Fund managers and analysts will likely concur that if the golden duo, Morgan and Banks, can’t consistently grow sales and profit then nobody can, and it’s time to close the book on the recruitment sector as a source of future IPOs and serious investor attention.  

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Scott Brown

And therein lies the disparity between recruitment industry perception by the broader business community and the facts. The industry is not a highly profitable one, with cigar-smoking, caviar eating, champagne sipping owners with swimming pools full of cash. It's a churn, and it isn't helped by this incredible abyss of understanding between those who are in the industry and those who aren't…yet seemingly the industry is almost always singled out for what I deem discriminatory and questionable attention…

Michael Overell

Good insight + implications here Ross.
I'm inclined to agree (at least for the foreseeable future) –> "When Talent2 departs the ASX board, there will be 8 recruitment companies remaining with little, if any, chance of that number increasing".

However, it's interesting to note that LinkedIn is up 100% on its IPO price (at 4/6/12).

Is this just a single data-point, or do you see the value (at least as perceived by investors) shifting away from the 'people'-driven models of recruitment, towards technology that improves the process?


Bob Olivier

Ross, interesting points you raise. Not many recruiters have ever performed well once listed. Its hard to think of any that have traded consistently above their issue price and some have tanked from the start! It surprises me every time one comes to market that investors are not more thorough in their due diligence. The brokers must have some very good sales people.

Likewise its hard to think of any of the leadership teams of those that have listed enjoying the experience other than the cash they take off the table when first listing. Again, did the advisors spin them a yarn or did the proported cash windfall blind them?

There are cheaper and easier ways of raising capital and taking cash out than an IPO. I also doubt that you'll see too much PE interest in our space as I'm sure these have been less successful than the investors expected when they bought in. eg Champ with IPA and whoever bought FiveTen.

It begs the question as to what will happen to those currently listed – all small or even "micro" cap with no easy way out as their share register in more broad based but equally illiquid. But then you've also got fund managers, particularly small cap specialists, who like some exposure to recruitment so may top up in the remaining 8 when they exit Talent2 so give their stock some support.

With much of the rest of the world in poor shape you can't see too many overseas buyers with bulging wallets willing to pay hefty multiples even on low earnings. Looks like many are going to just have to trade through the tough times or hope for a white knight.


I dont really think you can group LinkedIn with recruiters in the same way that some people wrongly group Seek within the indudtry. They're different models with difering revenue streams.

Darren Morris

Will it be the last run at a venture in recruitment who would be prepared to bet on it. With such speed of change perhaps there is the opportunity to flip the model on it's head and go again. This venture had such a different spin with HRO business lines moving them into new territory and increasing competition with global players with deep pockets. A long way from my first exposure of younger men prepared to share their experience at "a fireside chat"

Davor Miskulin

Indeed it is full circle for the Geoff and Andrew and they actually might be starting the bigger trend and not just in the recruitment industry in regards to public listing. Namely, did we lost our ways where the purpose and the ultimate goal of the IPO is the IPO itself? Look at the recent FB fiasco which for sure will mark pinnacle of such trend.

Ross is absolutely right regarding the low margin recruitment agency model which for sure can grow sales but the catch is its inherent high cost in what essentially is high manual labor participation model. Looking historically how much agency recruiter productivty improved over the last 40 years? Since I am technologist in the space I will not try to answer but my feel is – zilch/zero – it is still roughly the same as back in 1962!

Re LinkedIn – I think we are not giving this new phenomena enough time to show "weaknesses" of their model – still early days and number of low hanging fruit for them to pickup and grow numbers + superb PR but I think we will see numbers starting to fall in line rather then just continue to grow exponentially. It is simply not possible. Further more there will be for sure some industry response particularly from the job boards – it almost appears at the moment that LinkedIn is trying to be more like job boards while job boards are socializing their products at the same time – there will be convergence and true competition once recruiters on agency and corporate side realize that difference is not as big as perceived at the moment.


James Purtell

Presumably Morgan & Banks know what they’re doing if their track record is anything to go by.

The complex issue I see at the moment is that so many large organisations and their representatives are stating that they are cutting back on agency use etc and so on. What is harder to determine is whether it is indeed because of technology and that they are so much better at recruiting themselves. Or is it possible that they are not really actively hiring but simply replacing employees who depart. This would be much easier to keep ‘in-house’ because there is less competition for talent at the moment. I mean, let’s face it, many of those internal commentators who state that they have massively reduced their agency use have only been making those statements in this quite bearish hiring market over the last few years (in Sydney & Melbourne anyway). Evidence to support this hypothesis is that unless those commentators have some proprietary knowledge that remains out of reach to BHP and other companies in the mining states, recruitment agencies in those states are going gang busters by all accounts. So, if/when the War for Talent ever heats back up again in Sydney & Melbourne, it will be interesting to see whether it will be possible to make the same claims. I don’t claim to know the answer, just putting a little made alternate theory out there.


I just wish I hadn't lost so much money on t2 shares after buying them around $3.

Would love your thoughts, please comment.x
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