Ranked fifth in size throughout Europe, staffing service provider Creyf's of Belgium had operations in nine countries by 2001. CEO Michel Van Hemele felt local IT consulting group Bureau Van Dijk CS (BvD) would be a top addition. This would further his acquisition-based strategic plan to expand Creyf's specialised divisions, while simultaneously reducing the company's involvement in general temping. A high-value IT solutions provider, BvD's most attractive feature for Van Hemele was its specialist subsidiaries. With these, the CEO wished to develop the firm from a standard manpower provider, to a total solutions operator.
But many board members were sceptical. Creyf's had been badly burned in the 90s after buying loss making, and often even fraudulent companies in four Western European countries. And BvD were demanding what some felt was a very high price. Creyf's share price was consistently high, and its key clients and shareholders were content. Its relatively small size allowed it to offer more personalised services in its core sector, general temping services. But these were very expensive, and were gradually proving less profitable due to strong price competition. Nevertheless, the firm had grown in the past by making far smaller buyouts.
Distinguished Visiting Professor Paul Verdin presents the winner of the 2003 European Foundation for Management Development Case of the Year Award. As he illustrates, Van Hemele's main worry was that Creyf's would soon find itself stuck in the mid-range as a firm in a rapidly consolidating and globalising industry. This would leave it unable either to generate the results of the past, or to compete with the new "Big Four" European giants.
The CEO saw great opportunities in the newly liberalised Italian market. The world's number one firm Adecco had already entered aggressively. While Creyf's could not yet dream of matching Adecco's increasingly intercontinental stature, he felt bold action needed to be taken immediately
Van Hemele had engaged in a dual strategy of expanding its share of the domestic market, where it held third place, with more branch offices. It also quickly divested itself of its several loss-making, foreign subsidiaries in France, Britain Spain and Portugal, and instead concentrated on acquiring sound smaller firms in the Benelux, northern France and Western Germany. These were managed as autonomous units with maximum flexibility - in line with Creyf's motto of temping being by its nature a local business. It had also entered the newly liberalised Spanish and Italian markets.
But Van Hemele and CFO Bart Gonnissen thought this approach was no longer feasible. Creyf's scope of activities was too wide. They felt a need to focus on a specific activity as a basis for any further expansion.
But the financial markets were dubious of Creyf's ability to absorb BvD, which had a higher P/E ratio than Creyf's. If it hoped to challenge Adecco in the Italian market, it would need maximum liquidity. BvD's latest financial results were in line with a general downturn for most IT firms.
The case concludes with the deliberations being made before the March 2001 board meeting at which Van Hemele and Gonnissen were to fight their corner in favour of acquiring BvD. Would the board share their strong belief in the IT firm's long-term growth potential? Or would they join the majority of large clients and shareholders in pushing for continuity, especially in buying small firms that supported their core services in general temping?