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Company Perspectives
At Resources, we are not a sales organization, but rather a firm with a true client services orientation. Our success as a public company is a testament to the efficacy of our model for getting business done. Resources' Associates are seasoned veterans who have traded the stresses and pressures of a corporate ladder for the love and flexibility of steady project work. These project professionals are high-quality partners who want to make their careers with our firm; and we encourage them to do exactly that. The result is a work ethic driven by genuine motivation on the part of our Associates to see their projects completed and their clients satisfied.
Resources Connection, Inc. provides professionals on a project basis through its operating entity, Resources Global Professionals (RGP). Its specialties are accounting and finance, risk management and internal audit, information technology, human resources, supply chain management, and law. The company was formed in 1996 as a unit of Big Four accounting firm Deloitte & Touche and was spun off three years later to avoid regulatory conflicts. RGP has 65 offices in ten countries. Among its 1,600 clients are dozens of Fortune 100 companies.
Origins
Resources Connection, Inc. began in June 1996 as a division of Deloitte & Touche LLP (later Deloitte Touche Tohmatsu). It was led by Donald B. Murray, a partner at Deloitte who had been in charge of Deloitte's large auditing practice in Santa Ana, California. The unit's specialty was having experienced, senior-level financial professionals set up new accounting systems or handle mergers and acquisitions details for corporations on a project basis, at a lower cost than farming out the work to top tier firms. In 1997, the division became Resources Connection LLC, a wholly owned subsidiary of Deloitte & Touche.
Murray originally envisioned most demand for the firm's services among companies going public for the first time or engaged in mergers and acquisitions, noted a later profile in the Orange County Register. According to the Mergers and Acquisitions Report, Resources Connection did supply personnel for high profile takeovers such as the $10 billion acquisition of Bankers Trust Corp. by Deutsche Bank AG in 1999. However, the firm would also be kept busy during the wave of bankruptcies and downsizing that accompanied the burst of the tech bubble. Company CFO Steve Giusto told the Wall Street Transcript that the company averaged a nearly 140 percent annual growth rate in its first four years.
Within a few years Resources Connection was employing 850 people in 27 U.S. offices and was posting revenues of more than $100 million annually. Deloitte decided to spin off the unit to avoid costly regulatory burdens designed to keep auditing and consulting practices separate. Murray told Reuters that the company also believed the unit could grow faster on its own. Resources Connections LLC underwent a $55 million buyout by its 100 managers in April 1999. A new entity, RC Transaction Corp., had been formed five months earlier to acquire the company. Investment bank Evercore Capital Partners L.P. acquired slightly more than half of the outstanding shares. RC Transaction Corp. was renamed Resources Connection, Inc. in August 2000.
Public, and International, in 2000
Resources Connection, Inc. debuted on the NASDAQ in a December 2000 initial public offering (IPO) that raised $78 million. The success of the services-related IPO came in a market that had soured on tech stocks, noted the Daily Deal.
By this time, the company was supplying human resources workers as well as those in accounting and finance. It had also formed an information technology division. In 2000, half of its project employees and consultants were CPAs, however.
While there were fewer large mergers after 2000, according to the Mergers and Acquisitions Report, Resources Connection continued to benefit from a trend toward outsourcing. Another impetus towards growth would be the increasingly stringent financial reporting regulations that public companies were required to adopt following a wave of corporate accounting scandals in 2002.
Help from Sarbanes-Oxley
Resources Audit Solutions, LLC (RAS) officially started in June 2002 to help U.S. public companies deal with the new regulatory requirements of the Sarbanes-Oxley Act.
Other large accounting firms had gotten into consulting sidelines of their core audit and tax services, but these would be curtailed after a rash of accounting scandals. They ultimately divested such businesses to avoid perceived conflicts of interest. The Big Four would be its clients, as well as competitors. Other rivals included specialized units of employment agencies and temp services.
Resources Connection had grown purely organically before 2002. It began to make acquisitions in order to stretch its range of offerings and to expand geographically. Resources Connection was building up a practice in the United Kingdom. It acquired Ernst & Young's Executive Search and Selection unit in the spring of 2002. This was followed several months later by the opening of an office in Birmingham.
The RECN of Texas, LP subsidiary was formed in May 2002. In October 2002, Resources Connection bought a Houston supply chain management services firm called The Procurement Centre, LLC for $9 million (most of it in cash).
The firm's earnings slipped in the early years of the millennium, but came back strong with a recovering economy in 2003. Revenues rose 63 percent to $328 million in 2003. Much of the growth was from Europe and Asia. Sarbanes-Oxley work accounted for a third of revenues, an analyst told Investor's Business Daily. Another called Resources Connection "the biggest and purest play" in the new multibillion-dollar Sarbanes-Oxley compliance industry.
Fiscal 2004 Acquisitions
Resources Connection made its first move into Continental Europe when Executive Temporary Management BV (ETM) of the Netherlands was acquired from Ernst & Young in July 2003. The price was $29.8 million in cash. ETM, based in Maarssen, had been created in 1989. After the acquisition, it was renamed Resources Global Professionals Europe BV (RGPE).
The company also bought a subsidiary of Deloitte Touche Tohmatsu Australia. It paid $1 million for Deloitte Re:sources Pty Ltd. in June 2003, which was also renamed. Re:sources had offices in Sydney and Melbourne. A little later, the company announced it had purchased policyIQ, an Internet-based internal controls and risk management tool. This was folded into the Resources Audit Solutions (RAS) subsidiary.
In August 2004 the company paid $4.6 million for an 80 percent holding in Nordic Spring Management Consulting AB of Stockholm, Sweden. Nordic Spring had been established by former principals of Ernst & Young.
Expanding Around the World in 2005
The company was averaging better than 60 percent revenue growth. RAS accounted for nearly 40 percent of revenues in 2005. By this time, its market capitalization had risen from $288 million in the 2000 IPO to more than $800 million.
Some analysts wondered where the company's growth would come if its clients became accustomed to Sarbanes-Oxley requirements and began handling more of the drudgery themselves. Murray told the Investor's Business Daily the firm could find work in good times and bad. "We're not selling product," he said. "We just manage change."
In January 2005, the company announced its Resources Connection, LLC operating company would begin doing business as Resources Global Professionals (RGP) to reflect its global scope. A second Canadian office was opened in Alberta in May 2005. The company was expanding in northern Europe and giving special attention to its growing business in the Pacific Rim and India. Resources Connection had 1,900 clients in 39 countries in 2005. By this time, more than 20 percent of total revenues were coming from outside the United States.
The number of associates working for Resources Connection on an employee or contracting basis had risen from less than 1,200 to more than 2,600 in two years. These were supported by about 600 corporate staffers. Revenues of $537.6 million in 2005 were a colossal leap from the $328.33 million reported in the previous year and the $202.02 million reported in 2003.
In December 2005, RGP opened an office in Beijing, China. In addition to the Western multinational corporations doing business there, there were also more and more local firms adjusting their financial records to international standards in order to raise money from abroad, Murray told the Financial Times. He expected revenues from China to match those in the United States within ten years. RGP also had a local Shenzhen-based affiliate and offices in Taiwan and Hong Kong.
Entering another booming national economy, Resources Connection acquired the non-assurance business advisory services practice of Rajeesh Rajeev & Associates of Mumbai, India. It was renamed Resources Global Professionals India Private Limited.
No matter where in the world RGP was operating, one of its main challenges was finding an adequate supply of talent. Its associates typically had a dozen or more years of experience before joining RGP and usually boasted either a C.P.A. or an M.B.A. degree.
Principal Subsidiaries
Nordic Spring Management Consulting AB (Sweden); RC Holdings I, LLC; RC Holdings II, LLC; RC Management Group, LLC; RCG, LP; RECN of Texas, LP dba Resources Global Professionals LP; Resources Audit Solutions, LLC; Resources Connection Australia Pty Ltd. dba Resources Global Professionals Australia; Resources Connection Holdings BV (Netherlands); Resources Connection, LLC dba Resources Global Professionals, etc.; Resources Connection Taiwan Ltd.; Resources Connection (UK) Ltd.; Resources Global Professionals Europe BV (Netherlands); Resources Global Professionals, Inc. (Canada); Resources Global Professionals India Private Limited; Resources Global Professionals Japan K.K.; Resources Global Professionals Limited (HK) (China).
Principal Operating Units
Accounting and Finance; Risk Management and Internal Audit; Information Technology; Human Resources; Supply Chain Management; Legal.
Principal Competitors
Deloitte Touche Tohmatsu; Ernst & Young International; KPMG International; PriceWaterhouseCoopers International Limited; Protiviti Inc.; Jefferson Wells International, Inc.
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