Gulf Capital to inject $27.23m into Reach
Abu Dhabi, February 19, 2012
Leading private equity firm in the Middle East, Gulf Capital, has announced that it will inject additional financing of up to Dh100 million ($27.23 million) in one of its portfolio companies, Reach Group, following a major acquisition of the group last month.
Gulf Capital had acquired 80 per cent of Reach Group and will inject new funds to support the growth of Reach, both on an organic level and via acquisitions, said a statement.
The Dh100 million earmarked in additional financing will allow the group to have a solid regional expansion programme and to consolidate the fragmented sector via a series of bolt-on acquisitions. Reach focuses on supplying skilled and semi-skilled employees to government and quasi-government entities.
Dr Karim El Solh, CEO of Gulf Capital, said: 'Our investment falls within our strategy of acquiring significant, strategic stakes in well-established, fast-growing companies in the region which are leaders in their own industry. This acquisition capitalises on the growing need for outsourced business solutions of government entities across the region, a niche where Reach is a clear market leader. This investment is a strong bet on the future of outsourced business solutions in the region, primarily at the governmental level.'
'This partnership will allow us to consolidate our position in our home market, move into new growth markets and occupy a larger regional footprint. The financial investment is only one element in this relationship. Equally important for Reach during negotiations was the strong added value and expertise that Gulf Capital was bringing to the table to enable us to implement our ambitious long-term growth plans,' Malik Melhem, Chief Executive Officer, Reach group, said.
Reach has experienced a historical cumulative average growth rate above 30 per cent on both revenue and net profit levels over the past five years.
Gulf Capital is working closely with Reach management on an ambitious business plan that continues this growth trajectory and that aims to double the business over the next five years, the statement said.
The plan includes consolidating Reach’s position as the market leader in government manpower outsourcing and increasing its market share in both the UAE and across the region, it said.
Reach identifies, recruits and hires employees directly on its payroll and subsequently outsources them to its governmental clients, thereby reducing a significant logistical burden and overhead cost associated with the HR process for its clients.
As in developed markets, governments in the region can achieve significant savings by the use of outsourced staff, thereby driving demand for contract staffing as a result of the impetus to rationalise costs and streamline operations.
Clients that use outsourced employees can reduce their HR overhead significantly as contract staffing firms bear the costs and administrative burden of dealing with the logistics of hiring and placing the employees, the statement said.
The UAE staffing market is expected to grow at an annual growth rate of 33 per cent from 2011 to 2015, according to Staffing Industry Analysts. This is driven by a fast growing staff outsourcing trend resulting from increased manpower needs as governments increase spending on infrastructure projects to support growth in the UAE economy while at the same time seeking to reduce employee costs.
In January 2012, the Abu Dhabi Executive Council reaffirmed its commitment to a wide range of new projects and expansion plans, providing for significant new investments in social infrastructure, health, education and other sectors in line with the government’s overall long-term economic growth plans.
With over 400 government and semi-government entities in the UAE, this large list of potential clients for outsourced staffing creates a solid backbone of potential demand and structural market growth, providing Reach with significant growth opportunities, it said. – TradeArabia News Service