MPS Group, Inc.

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MPS Group, Inc.

1 Independent Drive
Jacksonville, Florida 32202-5060
U.S.A.
Telephone: (904) 360-2000
Toll Free: (800) 852-2281
Fax: (904) 360-2814
Web site: http://www.modispro.com

Public Company
Incorporated: 1992 as AccuStaff Inc.
Employees: 185,000
Sales: $1.55 billion (2001)
Stock Exchanges: New York
Ticker Symbol: MPS
NAIC: 561330 Employment Leasing Services

MPS Group, Inc. is a Jacksonville, Florida company that provides consulting and staffing services in the areas of information technology, finance and accounting, law, e-business, human capital automation, engineering, executive search, and workforce management. After becoming a regional power in the early 1990s, the company has engaged in an aggressive acquisition campaign, rolling up scores of temp agencies across the country and transforming itself into a national staffing firm large enough to rival much better known Manpower and Kelly Services. MPS has sold off its clerical staffing business, the traditional base of the temp industry, in favor of higher margin professional and technical placement. Aside from its extensive North America operation, MPS also operates in the United Kingdom and continental Europe.

Refusing the Limitations of the Glass Ceiling: 1970s

The origin of MPS is very much the personal success story of a woman named Delores Kesler. Born Delores Mercer, she grew up in Jacksonville on a poultry farm. Her father’s primary source of income was his job at Southern Bell, and poultry was just one of a number of side ventures in which he would engage over the years. None of them proved successful, however, due in some measure to his alcoholism. He died when Kesler was just 19. Despite his disease and mounting debts, she was very close to her father. As a teenager she began to manage his checkbook, in the process gaining valuable practical business experience. He was also instrumental in setting high expectations for her and instilling a belief in Kesler that she was capable of accomplishing anything that she set her mind to. Coming of age in the early 1960s, she graduated from high school with expectations that did not extend beyond getting married and starting a family, and by the age of 22 Kesler was divorced and a single parent. Because of her father’s death she also was helping to support her mother and younger brother. She went to work at an International Harvester dealership as a secretary and was promoted to various positions in personnel and sales. At one point she was training salespeople, but was herself denied the opportunity to become a salesperson. She watched the men she trained quickly pass her in salary. Hoping to enter their ranks by gaining a college degree, she tried to take advantage of a tuition reimbursement program only to learn that it was limited to male employees. A sympathetic supervisor named Bob Walls found a way around the rules by submitting her application using an initial instead of her first name. With tuition aid, Kesler went to school at night while working full-time and raising a family, although she had to drop out eventually and never did complete her college education. She then left International Harvester to spend eight years managing a nurses registry business. In 1977 she decided to start her own business, after concluding that she was already running a business for someone else and could do it better if she had control.

After conducting some research Kesler resolved to start a temporary medical staffing agency. While working in the personnel department at International Harvester, she became familiar with the temp business, setting up training seminars for International Harvester around the country and hiring local temporary employees to assist her. Kesler wrote a business plan for her proposed venture, which she then shared with banks in an effort to secure a $50,000 start-up loan. Unable to grasp the potential of her idea, because the industry was very much limited to clerical workers and far from mature, or they were dissuaded by her gender, nine different banks turned her down. Kesler then applied to a high school classmate who served as a loan officer at the tenth bank she targeted. He confided that no bank would lend her that amount of money. Rather than be discouraged, however, Kesler simply asked how much he was authorized to lend without additional approval. Told $10,000, she immediately pressed for that amount of money, which her ex-classmate reluctantly agreed to provide. Kesler set up a bare bones operation—little more than a card table, folding chair, and telephone—and within six months of starting Conval-Aide Medical Staff in 1977, she was able to repay the $10,000 loan.

Establishing Associated Temporary Staffing in 1978

In 1978 Kesler started a second staffing agency, Associated Temporary Staffing, which became known as ATS Services Inc., supplying clerical and industrial workers. In retrospect, it was perfect timing to enter the temp business. Annual payroll in the industry grew from $4 billion in 1983 to nearly $20 billion a decade later. In 1987 ATS was named one of the 500 fastest growing companies in the United States by Inc. magazine, and Kesler also was gaining her share of recognition as one of the country’s top female entrepreneurs. Generating $35 million a year in revenues, ATS dominated its local market. Kesler entered new territories and eventually decided that she could take her business national and challenge the only three staffing companies operating nationwide. Growing larger also was becoming a necessity to stay competitive in the industry. In 1992 she engineered the merger of ATS with three other companies: Abacus Services Inc., BSI Temporaries, and Metrotech Inc. The new company was named AccuStaff. As part of the deal, the medical staffing business of ATS was pulled out and passed into the hands of Kesler’s son and daughter, who would operate the business under the ATS name.

Terms of the merger also called for Kesler to serve as president and chief executive officer for one year while a new top executive was recruited and hired, at which point she would become chairman of AccuStaff. The national search for a new CEO lasted almost two years. Ultimately Kesler tabbed Derek Dewan, who had been instrumental in structuring the AccuStaff merger while working as a managing partner with Coopers & Lybrand. The son of Christian Lebanese immigrants, Dewan’s father became an accountant and moved his family to Jacksonville in 1968. Dewan graduated from an area high school and then studied accounting at the University of South Florida. He returned home to Jacksonville, taking a job with Price Water-house before joining the Jacksonville office of Coopers & Lybrand in 1982. Talented and hardworking, Dewan made partner at the age of 29. He took on the ATS account and began to work closely with Kesler, eventually serving as both her accountant and business adviser in the complicated transaction that resulted in the creation of AccuStaff. One reason why Kesler’s executive search dragged on so long was her courting of Dewan. He rejected an initial offer because a retirement at Coopers allowed him to become a managing partner at the Jacksonville office. AccuStaff, on the other hand, was far from the national operation that Kesler envisioned, with operations only in a handful of states and revenues of just $89.1 million in 1993. Kesler offered Dewan a job a second time, and after some reflection he decided that AccuStaff offered the best possibility for taking the next step in his career without leaving the Jacksonville area. He accepted and took over as CEO of the company in January 1994.

Dewan’s first priority was to take AccuStaff public in order to amass a war chest for an aggressive expansion campaign. Even before the offering, AccuStaff began acquiring staffing companies, primarily in the Southwest and Midwest where the use of temp services was growing at an accelerated clip. Revenues grew to $137.1 million in 1994, and net income increased to $3 million, a significant improvement over the $700,000 in earnings posted in 1993. In 1995 AccuStaff would add another ten companies to the fold, including agencies that supplied attorneys and computer technicians. As a result, revenues in 1995 almost doubled, topping $267 million, and net income improved to $8.7 million. It was an impressive showing, but only a harbinger of what was to come.

Kesler turned over the chairmanship of AccuStaff to Dewan in 1996, and a year later she retired from the board to pursue her charitable interests. Dewan now stepped up the pace of acquisitions, rolling up 39 more staffing companies during the course of 1996, in particular strengthening the company’s professional services: accountants, lawyers, engineers, and information technology (IT) specialists. Karen L. Tippet in a 1996 Wall Street Journal article described Dewan’s method: “Once he identifies a target, he makes a generous offer that sometimes involves equity in AccuStaff; promises to make a place at AccuStaff for executives who want to stay on, even allowing the target company to keep its name.” Moreover, Dewan was persistent, refusing to accept rejection easily. By far the most significant acquisition of the year was the $900 million stock purchase of Career Horizons Inc., to that point the largest acquisition of an American staffing company. In one stroke, Dewan transformed AccuStaff into the nation’s fourth largest staffing company, trailing only Manpower, Kelly Services, and Olsten Corp. Focusing on healthcare, financial services, and IT, Career Horizons was formed in 1990 and spun off by Manpower. Career Horizons also had been engaged in an expansion program, having itself added nine acquisitions since leaving Manpower. Not only did the Career Horizons acquisition extend the reach of AccuStaff to more than 750 offices in 43 states, it promised to have a significant impact on the company’s bottom line. To attract the business of major corporations, it was important that AccuStaff have the capability to service all regions of the country. Simply put, national companies did business with other national companies. Aside from taking AccuStaff to that level, Dewan hoped to achieve $1 billion in annual revenues by 2000. That mark would be easily achieved in fiscal 1996, when the company booked sales of nearly $1.45 billion, while also realizing a $27.9 million net profit.

Company Perspectives

MPS Group helps its client companies thrive by delivering a unique mix of consulting, solutions, and staffing services in the disciplines of information technology, finance and accounting, law, e-business, engineering, human capital automation, executive search, and work force management.

Dewan was a relentless empire builder, known to sleep only four hours a day and maintain a dedicated telephone line in his home to continue his never-ending string of negotiations. His aggressive style, however, sometimes caused friction both within and outside the ranks of AccuStaff, but few could question his success. In 1997 he continued to roll up staffing companies at a tremendous clip, adding 28 acquisitions during the course of the year. The company moved into career development and outplacement services, assisting clients in placing laid-off employees, by acquiring Manchester Inc., a Philadelphia, Pennsylvania firm. AccuStaff also engaged in some reorganization in 1997, grouping its information technology businesses under a new division named Modis, as well as creating MindSharp Learning Centers to offer training services. Moreover, Dewan began to look beyond the U.S. borders, opening offices in Toronto and London, and making plans to enter Europe. In 1997 AccuStaff continued a string of impressive results, generating $102 million in net profits on more than $2.4 billion in sales.

Selling a Strategic Unit in 1998

In 1998 AccuStaff backed off its consolidation efforts, opting instead to focus on the higher margin business of its information technology and professional divisions. In March the company sold off its healthcare division for $116 million. It next announced that its commercial staffing businesses would be spun off as a separate company, Strategix, which was to be taken public later in the year. What remained of AccuStaff would then be renamed Modis Professional Services. Wall Street investors received the idea with little enthusiasm, and they responded harshly to the report of Dewan’s arrest for solicitation in late July 1998. He was charged with offering $40 to a police prostitution decoy, which he adamantly denied. Nevertheless, the price of AccuStaff stock plummeted, resulting in a loss of $500 million in the company’s market value. Dewan’s vow to prove his innocence in court failed to rally the price of AccuStaff shares, which was due in some measure to Wall Street’s increasing disinterest in the stock of temp firms. With an IPO for Strategix looking less promising, Dewan decided instead to sell the subsidiary to Ranstad Holding NV, a Dutch international staffing company, for $850 million. Dewan earmarked approximately $420 million to pay off the company’s debt and the balance reserved for further acquisitions, especially in the IT area. Upon the completion of the transaction AccuStaff officially changed its name to Modis Professional Services.

Despite his arrest, Dewan maintained the support of his board. He continued to express his intention to fight the solicitation charges, but his attorney never sought discovery of the prosecution’s evidence, a move that according to Florida public records laws would have made an audiotape between Dewan and the police decoy available to the media. In May 1999 he finally pleaded no contest to the misdemeanor charge, agreeing to pay a fine of $150 while not admitting or denying the charge. Although Dewan said he did not think he violated the law, he decided that it was in the best interests of everyone involved simply to settle the matter.

The price of Modis stock continued to languish in 1999, prompting Dewan to announce a further reorganization of the company, which was intended to unlock the hidden value of Modis. The plan was to split professional business staffing services and the information technology unit. The IT business would be further divided by spinning off the e-business division. The result would be three separate companies and three separate IPOs. It would also mean that top executives would be promoted to serve as the CEOs of the new entities. Because of poor market conditions, especially in the technology sector, the plan never came to fruition and a year later, in November 2000, it was abandoned. As a result, Dewan also decided to step down as CEO in favor of Timothy D. Payne, who had been tabbed to head one of the separate companies. Payne joined the company in 1997 when AccuStaff acquired Openware Technologies Inc., a company he was running. Dewan remained as chairman of the board, giving up day-to-day responsibilities but continuing to plot Modis’s overall strategy. In addition, the company bolstered its board, adding such national figures as former U.S. Senate Majority Leader George J. Mitchell.

With the U.S. economy slipping into recession in 2001, Modis cut debt and positioned itself to take advantage of an eventual recovery. It also directed increasing attention to expanding its European presence. Although revenues were down in 2001, the company remained profitable, posting net income of $8.3 million. Because the company used the Modis brand of its information technology business, the board voted to change the name of the parent corporation to MPS Group to avoid confusion and enhance Modis brand recognition. In February 2002 Payne announced his intention of adding four specialized business areas over the next two years, achieved either through start-ups or by acquisition. He also suggested that nurse staffing services might be a possible new business. If so, it would link MPS to its roots, when a single mother entered the medical staffing business with nothing more than a card table, folding chair, a telephone, and a belief in herself.

Principal Subsidiaries

Idea Integration Corporation; Modis Inc.; Prolianz Corporation.

Key Dates

1978:: Delores Kesler forms ATS Services.
1992:: ATS merges with three staffing companies to create AccuStaff.
1994:: Derek Dewan is named CEO and takes the company public.
1996:: Career Horizons acquisition makes AccuStaff a billion-dollar company.
1997:: Kesler retires from the board.
1998:: AccuStaff changes its name to Modis Professional Services following the sale of Strategix subsidiary.
2001:: The company assumes the name of MPS Group.