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RegionalHelpWanted Sold For 4x Sales, 16xEBITDA
RegionalHelpWanted (RHW) was sold to OnTargetJobs, a Texas-based company that operates a handful of niche job boards. OnTargetJobs, backed by private equity firm Warburg Pincus, reportedly paid $100 million for RHW. Some blog posts state that RHW did about $35 million in sales last year, but the number was probably closer to $25 million. (We compete with RHW in every single market we’re in and track their business pretty regularly. We also run radio spots on some of the same stations).
It’s also critical to factor into the equation that RHW operates much like an ad agency, buying media (radio ads) for its clients, billing their employer advertisers, and then paying the stations. While RHW was able to buy extremely cheap radio ads (RHW pays its radio station partners an average of about $4 or $5 per radio commercial which typically run between midnight and 5 AM), it still had to pay about 50% of its billings back to the stations. My guess is that RHW generated EBITDA of roughly $5-7 million in 2007. So, if my assumptions are even remotely close to accurate, OnTargetJobs paid about 4x sales, or 16x EBITDA for the business.
These are pretty rich multiples for any company, but especially one that has some less than stellar characteristics. RHW’s growth rate slowed substantially once it had completed its expansion across the country and signed up radio station partners in each of its markets. While the individual sites had some job listings from a handful of large staffing companies, they had nowhere near the type of classified count or unique employer count one would expect to find on a healthy local job board. Equally as damning, the site traffic generated by each of its local job boards was pretty anemic.
In point of fact, RHW’s business model was such that its real customers were the radio stations themselves, not the employers who posted ads on its various sites. The company did a phenomenal job of delivering a small but consistent and low-maintenance revenue stream back to its radio station partners by reselling excess inventory (among the most perishable in the universe), but I don’t think it did much for its employer advertisers. Not once in 5 years of selling recruitment advertising to local employers in all of our markets, with 100% overlap with RHW, did RHW ever come up on a sales call of ours. Not once.
The company was an inch deep and a mile wide, with negligible market share (in terms of local job listings), a tenuous value proposition for employers, and not much traction among job seekers. These are not great characteristic for a business that supposedly operates in the recruitment advertising space. But what RHW did have was a substantial, extremely impressive footprint across the country. And while that footprint might not be worth $100 million, it clearly creates enormous potential for someone like OnTargetJobs if they can leverage it in a way that RHW was perhaps finding it difficult to do. In any event, it’s a compelling acquisition, and one worth watching in the coming months and years.
[tags]RegionalHelpWanted, M&A Activity In Recruitment Advertising Space, OnTargetJobs, Niche Job Boards, Warburg Pincus, Deal Activity in Recruiting Industry, Online Job Boards[/tags]