KELYA Kelly Services Inc

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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