Gulf Capital acquires 80% of Reach Group
Gulf Capital, one of the largest and most active private equity firms in the Middle East, announced today that it will inject additional financing of up to AED 100 million in one of its portfolio companies, Reach Group (Reach), following a major acquisition of the Group last month.
Gulf Capital had acquired 80% of Reach Group, a leading contract staffing and temporary employee solution provider to government entities across the United Arab Emirates, and will inject new funds to support the growth of Reach, both on an organic level and via acquisitions. The AED 100 million earmarked in additional financing will allow Reach 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, Chief Executive Officer 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. We were impressed with Reach’s business strategy, market positioning, strong momentum as well as the depth and caliber of its senior management. This investment is a strong bet on the future of outsourced business solutions in the region, primarily at the governmental level.”
Mr. Malik Melhem, Chief Executive Officer, said: “We are thrilled to be partnering with Gulf Capital, one of the largest regional investment companies. 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.”
Reach Group has experienced a historical Cumulative Average Growth Rate above 30% on both the 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 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.
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. Reach is headquartered in Abu Dhabi, UAE and was founded in 2001 by its Chief Executive Officer Mr. Malik Melhem. Mr. Melhem will remain as a co-owner of the Company and member of the Board of Directors.
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 rationalize 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. According to Staffing Industry Analysts, the UAE staffing market is expected to grow at a annual growth rate of 33% from 2011 to 2015 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.
About Gulf Capital
Gulf Capital is a leading alternative investment company focused primarily on investing capital in the GCC region. Incorporated in Abu Dhabi in 2006 as a Private Joint Stock Company, Gulf Capital was established with a capital base of AED 1.225 billion (USD 330 million) from 300 of the most prestigious institutional and individual investors in the Gulf. The Firm is currently investing its $533 million GC Equity Fund II, raised from regional and global investors. It is focused on acquiring sizeable and controlling stakes in highly profitable and rapidly growing companies within a select number of fast-growing industries in the GCC region. Gulf Capital was awarded the “Best Private Equity in the Middle East” Award by Banker Magazine in 2011. Gulf Capital expanded its alternative asset management platform by entering into the real estate development arena in a joint-venture with the Related Companies, the most prominent US real estate developer, to form Gulf Related. The Firm also recently announced the launch of a Credit and Mezzanine Business to meet the financing needs of fast growing companies across the region. With its private equity, real estate and credit initiatives, Gulf Capital is today one of the largest alternative asset managers in the Middle East. For more information about Gulf Capital, please visit www.gulfcapital.com.
About Reach Group (Reach)
Reach Group is a leading contract staffing and temporary employee solution provider to government entities across the United Arab Emirates. It is headquartered in Abu Dhabi, in the United Arab Emirates, and was founded in 2001 by its Chief Executive Officer, Malik Melhem. Reach searches, identifies, recruits and hires employees directly on its payroll and subsequently outsources them to its clients, thereby reducing a significant burden of the HR process for its clients. The company’s clients include government and quasi-government entities, public healthcare institutions, and leading government associated companies. More recently Reach has been actively pursuing and has been successful in adding private sector clients to its client portfolio. The company currently outsources a significant number of employees, primarily comprised of engineering, technical, customer service, customer care, data entry and medical administrative staff.