Manpower on an Acquisition Spree - Analyst Blog
15 Juin 2011 - 10:30AM
Zacks
Manpower Inc.
(MAN), one of the leading employment services provider is on an
acquisition spree in China. In a recent development, the company
announced the acquisition of the majority stake in REACH HR, a
leading human capital contributor in manufacturing segment with
100,000 associates in Guangdong Province.
The buyout was in line with the
company’s farsighted strategy of nurturing and supporting China's
industrial employees, thus helping in revamping its industrial
zones and stretching its business into new domestic hubs.
Moreover, the acquisition will
facilitate the company to solidify its operational roots in the
trade and industrial regions of southern China, which is also close
to Hong Kong's shipping operations.
Going with its extensive expansion
strategy, Manpower, a week before, announced the acquisition of
Xi'an Fesco, a leading human resources provider with 10,000
associates in Shaanxi Province.
Now, as the manufacturing output in
China is touching new heights, these acquisitions are highly
accretive to the ManpowerGroup as they position the company as a
dominant leader in providing pioneering workforce solutions to the
new and flourishing domestic regions of China.
Further, Manpower also entered into
a partnership with the City of Kaifeng in Henan Province, thus
gaining access to millions of workforce in North Central China. The
move not only broadens Manpower's position in China but also places
it among the country's largest provider of pioneering staff
solutions, starting from administrative or managerial hunt and
recruitment process outsourcing (RPO) to outsized recruitments and
short-term staffing.
Current scenario reflects that
China is having a dearth of trained workforce with the right
technical skills for its five-year-plan including infrastructure
development in the inland regions. Moreover, China’s total
industrial output is forecasted at $1.8 trillion, making the
manufactures and producers the key drivers of China's economy.
Hence, Manpower’s strategy is
developed in tandem with China's five-year plan, in which Manpower
will facilitate the momentous repositioning of the sector by
providing the required human capital.
Moreover, ManpowerGroup also
entered into a partnership with China's Ministry of Industry &
Information Technology (MIIT), an important landmark in the
company’s China operations, for developing a talent exchange
center. It will also facilitate its partners to provide a
wide-range of workforce solutions that falls in line not only with
the policies of single manufacturers but also with China's
manufacturing growth projections.
Founded in 1948 and headquartered
in Milwaukee, Wisconsin, Manpower is the global leader in
employment services industry and commands a well-established
network of nearly 3,900 offices in 80 countries.
Manpower’s comprehensive range of
services makes the company a true global staffing firm. The company
provides services to the entire employment and business cycle
including permanent, temporary and contract recruitment, employee
assessment and selection, training, outplacement, outsourcing and
consulting.
Further, the company’s brand value
and strong global network provide a competitive advantage to the
company and reinforces its dominant position in the market.
Moreover, Manpower benefits from growth prospects in the under
penetrated staffing markets of Italy, Germanyand the Nordic region,
and has significant operations in high-growth emerging markets of
India, China and Eastern Europe. Consequently, the company has a
strong upside potential
However, the employment services
industry is highly competitive with limited barriers to entry, and
Manpower faces stiff competition in both domestic and international
markets from other established players, such as
Randstad (RAND.AS) and Kelly Services
Inc. (KELYA). An intense competition may limit the
company’s market share and profitability
After evaluating the pros &
cons, we prefer to maintain a long-term ‘Outperform’ recommendation
on the stock. Moreover, Manpower holds a Zacks #1 Rank, which
translates into a short-term ‘Strong Buy’ rating.
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