Swallowing a Monster
Last week, Dutch recruiter Randstad Holding agreed to pay $429M ($3.40 a share) for Monster, a pioneer of the online job posting industry that once traded at over $90 a share.
So now Randstad is buying Monster. Monster was one of the original market leaders in terms of job boards. It expanded quickly and had very good positioning. In the last years it seems to have lost its way, however. Rumors that Monster was a takeover target have been circulating at least since 2006.
Randstad says Monster will operate as a separate entity and keep its name. Randstad says the benefits to it include:
- “new and innovative capabilities that deliver greater value to job seekers and employers by bringing labor supply and demand closer together”
- “services to offer both clients and candidates tools for increased efficiency and engagement, connecting more people to more jobs”, and
- increased earnings per share for Randstad.
Monster used to be valued very highly, but its value has steadily eroded. Back in the year 2000 it had a share price of USD 90. Today it trades at USD 2.77 and the agreed price of $429M cash represented $3.40 per share or a premium of 23%.
Randstad faces a challenge in returning Monster to a growth mode. It is too big, not specialized sufficiently and recruitment has moved from a “post and pray” mentality to the more pro-active direct search model.
This does not mean the job board is dead. It just means that its importance for mid-level and certainly for senior level positions has declined.
Another question will be whether recruiters will continue to use Monster as a job board if it belongs to a competitor. Microsoft buying LinkedIn is a different matter since Microsoft is not in the recruitment business. Here we are talking about a major competitor.
The purchase price implies an enterprise value to LTM 6/30/2016, adjusted EBITA multiple of 8.9x (excluding stock based compensation) and 10.3x (including stock based compensation).
An Enterprise value of 10 times EBITA does not seem particularly high for this sort of company. On the other hand, Monster has steadily been slipping so it is not a surprise that the enterprise value is lower than other, similar companies.
It remains to be seen whether Randstad can turn the company around and make it more relevant again or whether it will disappear into obscurity.