The Business Services sector continues to demonstrate strong defensive qualities such as earnings and margin resilience linked to long term contract relationships.
In addition we believe there is potential for leading operators within the sector to capitalise on attractive growth opportunities, for example the increasing prominence of outsourcing arising out of the current global financial and economic situation.
Private equity’s ability to support ambitious growth plans and deploy capital into businesses gives it an important role in the next phase of evolution of the services sector. We believe that leading operators are going to find opportunity in three particular areas: Continuing outsource penetration, Internationalisation and Consolidation.
We seek to invest internationally within six broadly-defined sub-sectors:
- Testing, inspection and certification: A highly fragmented and growing global market, driven by globalisation of trade movements and increasing quality verification;
- BPO and consultancy: Services with business process outsourcing or high skilled advisory activities at their core, where successful operators use intellectual capital to build strong client relationships, a compelling brand positioning and a rounded product offering;
- Human capital: Includes staffing, education and training businesses where developing or managing people is key;
- Facilities management: Covering both ‘hard’ and ‘soft’ facilities management activities, where efficient operations, often with large workforces, are essential for high quality and profitable service delivery;
- Industrial services: Support services to industrial sectors such as oil & gas and utilities, often of a technical nature. Growth is driven by the need to maintain ageing assets in mature economies and expand the asset bases of developing economies;
- Logistics and infrastructure support services: Covering a number of support services including logistics, distribution, waste and rental. Specialist distributors who understand and adapt to clients’ needs can earn high returns in a market where ‘commoditised’ players face continuous pressure on margins.