1001 East Palm Avenue
Tampa, Florida 33605
Telephone: (813) 552-5000
Toll Free: (888) 663-3626
Fax: (813) 552-2493
Web site: http://www.kforce.com
Incorporated: 1998 as Romac International, Inc.
Sales: $661.45 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: KFRC
NAIC: 561320 Temporary Help Services; 561310 Employment Placement Agencies
Kforce Inc. is a professional staffing services firm that provides temporary and permanent workers trained in finance and accounting, technology, healthcare, clinical research, and scientific fields. Kforce operates 62 field offices in 24 states, maintaining a presence in 45 markets. The company derives more than 90 percent of its annual revenue from placing temporary workers.
When the Kforce name debuted in 1999, it was the corporate banner for a nearly 40-year-old business. Kforce was a new name for an old company, one whose size roughly doubled the year before the name change when two competitors, Romac International and Source Services Corporation, joined together to create a new national force in the staffing services industry. Source Services was the larger of the two companies when they merged, but Romac was dominant partner in the corporate marriage, with its absorption of Source Services representing one of a string of acquisitions completed by the company during the latter half of the 1990s.
Both Romac and Source Services were founded during the 1960s, a decade of exponential growth for the staffing services industry. Both companies operated in a niche within the U.S. staffing services industry. The industry, as a definable, organized entity, did not emerge until after World War II, when the economy began relying on a class of workers willing to satisfy the sometimes fleeting employment needs of corporate and industrial America. Once industry and commerce in the United States reached substantial proportions, the need for staffing services existed as a conduit connecting the needs of employers with the needs of employees. To gain the status of a definable, national body, the staffing services industry drew from the maturation of two if its most important constituents, Manpower, Inc. and Kelly Girl Service, both formed in the immediate postwar years.
Both Romac and Source Services had much more in common with Manpower. Manpower began by supplying industrial temporaries during its first year of operation, but diversified its services in subsequent years to include salespeople. By the early 1960s, the company had established a technical division to provide architects, engineers, and draftsmen to its clients, entering into the specialized industry niche that Romac and Source Services would occupy. The 1960s also saw the staffing services industry being used as a strategic tool, evolving beyond a stopgap resource for replacing sick or vacationing employees to become an effective means of cutting costs and contending with the dictates of business cycles. Personnel managers realized the advantages to be gained in tapping into a pool of temporary workers to negotiate through upturns and downturns in business, benefiting from the added fluidity of labor management and realizing significant financial savings from reducing the payment of unemployment taxes.
Romac and Source Services were born during the staffing industry's first decade of meaningful existence. Source Services was the older of the two, starting out in 1962. Romac, which was founded as Romac & Associates, was founded four years later, beginning a rise through the industry's ranks that would take decades before the company's growth could be discernible on a national level. In its gradual rise to what it later became, Romac emulated its more prominent mentor, Manpower. Manpower, which set the tone for the development of generations of staffing services to follow, began a franchising program early in its history. By the time Manpower established its technical division, 75 percent of its more than 300 offices were operated by franchisees. Romac followed suit, selling its first franchises in 1976. Romac was small at this point, a local and regional staffing services firm that was two decades away from asserting itself as a company with a national profile. The company did not begin to demonstrate the inclination of becoming an industry player until the 1990s, a decade when the outsourcing of nearly every corporate function was in vogue and a decade that would see Romac's path cross with the rise of another staffing services firm, Source Services.
During its first decades in business, Romac provided skilled workers to companies involved in accounting, banking, and data processing. Its focus shifted during the decade of its greatest growth, when a new breed of trained employees was sought after by scores of companies. During the 1990s, information technology (IT) specialists were in demand, offering a lucrative business area for staffing services firms who provided skilled labor. Both Romac and Source Services built their businesses around the IT sector, using the field as their mainstay source of revenue. Although both companies also provided workers for the financial and engineering fields and other disciplines that required skilled labor, the recruitment and supply of IT specialists became the bedrock of both companies' financial well-being.
Romac began demonstrating the desire to become a national force one year before its 30th birthday. The occasion that triggered the company's drive to expand was its debut as a publicly traded concern in 1995, when the company maintained more than 20 offices in 19 markets. During the course of three decades, Romac had evolved from a local staffing services firm into a regional firm, a pace of expansion that would be eclipsed by far during the latter half of the 1990s. Romac accelerated its pace of expansion by acquiring other companies, embarking on an acquisition campaign that would see the company complete 13 acquisitions in the three-year period leading up to its seminal deal with Source Services.
Most of the acquisitions completed before the Source Services merger were small in stature, but each added a new area of the national map to Romac's geographic scope. The purchases made in the years leading up to the Source Services deal showed a company making a concerted attempt to broaden its operating territory. In March 1997, Romac purchased Houston-based Professional Application Resources, Inc., a firm that specialized in providing contract services for IT personnel in Houston and Dallas. Several months later, in September, Romac bolstered its presence in the Chicago area by acquiring Oakbrook, Illinois-based UQ Solutions, Inc., a firm that provided IT personnel. Before the end of the year, Romac entered the Denver market through an acquisition, purchasing, in December 1997, Englewood, Colorado-based DP Specialists of Colorado, Inc., a leading IT consulting firm that specialized in providing highly skilled consultants to the Denver market.
Romac completed its 13th, post-IPO acquisition two weeks before coming to terms with Source Services. At the end of January 1998, the company purchased Washington, D.C.-based CRE, Inc., a leading provider of staffing services within the human resources discipline. Romac by this point marketed itself under the trademarked phrase "The KnowledgeForce Resource," which would serve as the basis for the name it would adopt after the Source Services merger was completed. Romac's chief executive officer, Dave Dunkel, whose responsibilities were increasing substantially with each acquisition, commented on the addition of CRE to Romac's portfolio of assets, marking the occasion with a statement quoted in the January 29, 1998 issue of PR Newswire . "This is a major step forward in Romac's ability to offer the capability of a national network of widely recognized human resource experts who can act as an extension of our clients in the execution of their deliverables," Dunkel said.
Days later, Dunkel announced the biggest deal in Romac's history. In mid-February, Romac and Source Services revealed that they had agreed to a $375 million merger in a stock-for-stock deal. The announcement promised to create one of the largest staffing agencies of professional and skilled workers in the country. Romac, thanks to the acquisitions completed since its IPO, was in the midst of a tremendous growth spurt, having increased its revenues from $94 million in 1996 to $181 million in 1997, the last year the firm released annual financial results before it absorbed Source Services. Romac collected its sales total from 31 offices serving Fortune 1000 companies in 18 markets, a corporate profile set to become substantially more distinguished with the addition of Source Services' operations. Source Services possessed 54 offices in the United States and one in Canada, providing professional workers trained in the finance, engineering, healthcare, and legal fields. Source Services derived two-thirds of its $295 million in sales in 1997 from providing temporary and permanent workers to the IT industry. Once combined, the new company was projected to have annual revenues of $476 million, a total drawn from 86 offices in 40 markets, including the 25 largest markets in the country.
Although Source Services was larger than Romac, Romac was the surviving entity following the merger. The combined company was named Romac International, a company led by Dunkel that counted Source Services as a wholly owned subsidiary. In 1999, the name of the company was changed to kforce.com, an abbreviation of the company's KnowledgeForce marketing slogan. The name change coincided with the company's decision to re-create itself as an Internet-based business, making the beginning of the 21st century the beginning of a new era of existence for the Dunkel-led organization. More than $50 million was spent moving the company's business online, including $4.5 million spent to air commercials on Super Bowl Sunday in early 2000. The strategic shift was ill-timed, however, occurring just before a national recession, the sweeping collapse of dot.com companies, and a deleterious dip in hiring IT personnel conspired to wreak havoc on the "new" kforce.com and its mainstay business of supplying IT specialists through a web-based service.
Kforce.com's losses mounted at the turn of century, prompting cost-cutting measures and a decision to distance itself from the implosion of the dot-com industry. Although the company continued to conduct business online, management decided to drop the ".com" from the corporate title, making the subtle yet symbolic switch to "Kforce." The company incurred losses for four straight years between 1999 and 2002, recording its most devastating loss in 2002, when Kforce registered a $47 million loss. In 2003, the company arrested its financial slide by posting a profit of $5.1 million on sales of $495.5 million.
Although Kforce's financial performance was far from impressive during the early 2000s, the company did make several positive moves. In 2001, Kforce acquired Emergency Response Staffing Inc., an Arizona-based company that placed nurses in hospitals. The acquisition of Emergency Response was followed by another purchase, one that bolstered Kforce's involvement in the pharmaceutical sector. Scientific Staffing, a Florida-based company that provided lab technicians to the pharmaceutical industry, was purchased.
Kforce's return to profitability in 2003 occurred as the national economy began to show signs that recessive conditions were coming to an end. The improving economic climate renewed interest in the staffing services industry as a whole, ushering in a period of consolidation in a fragmented industry populated by roughly 7,000 firms in the United States. Dunkel and his management team became part of the trend toward consolidation, setting their sights on a Novato, California firm named Hall, Kinion & Associates (Hall Kinion).
Hall Kinion, boasting 300 employees, 2,000 contract workers, and 18 field offices, began looking for a suitor in 2003. Hall Kinion was intent on becoming a billion-dollar company, and forging a partnership with another staffing services firm became central to reaching its financial goal. Hall Kinion shopped itself to 37 different companies, piquing the interest of 21 firms, Kforce included. A bidding war ensued, as each of the parties attempted to gain control of Hall Kinion. Kforce emerged as the winner in late 2003, announcing that it had agreed to pay $63.8 million for Hall Kinion.
As Kforce and Hall Kinion worked on turning their agreement into a completed deal, industry observers assayed the merger. The addition of Hall Kinion to Kforce was expected to increase annual revenues by one-third. The geographic gains were expected to be less meaningful, with only two new markets—Oregon and Utah—added to Kforce's national footprint as a result of the merger. One aspect of the merger that impressed onlookers was Hall Kinion's OnStaff division, a result of the company's acquisition in 2002 of Burbank, California-based OnStaff, which placed accountants, bookkeepers, and loan processors at mortgage companies, banks, and other financial institutions.
As Kforce prepared for the future, the company hoped to establish a new trend of profitability. The merger with Hall Kinion, after being renegotiated for the lower price of roughly $50 million, was completed in June 2004. The union with Hall Kinion was not expected to be the last in Kforce's push toward national dominance. The staffing services industry continued to consolidate during the mid-2000s, offering new opportunities to achieve rapid growth for Dunkel and his senior managers.
Source Services Corp.
Adecco S.A.; MPS Group, Inc.; Robert Half International Inc.
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——, "Kforce Ends Up Top Merger Suitor," St. Petersburg Times, January 3, 2004, p. 1D.
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——, "Kforce.com Earnings Rise, but Investors Want More," St. Petersburg Times, July 27, 2000, p. 1E.
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—Jeffrey L. Covell