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Adecco Pays a Steep Price for New Leadership

Part of Adecco's $826.4 million deal for a German staffing company will be the acquisition of a new CEO and CFO.

February 1, 2006
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Companies often lament the increasing cost of recruiting key executives. But Swiss staffing firm Adecco took it to a whole new level this month when it announced that one of the primary reasons it was purchasing DIS, a German professional staffing company, was to get its top management.

Under the $826.4 million acquisition, DIS chairman and CEO Dieter Scheiff and CFO Dominik de Daniel will become chief executive and chief financial officer, respectively, of the combined company.

Adecco’s former CEO, Jerome Caille, left last year in the wake of an accounting scandal that plagued the company’s U.S. business. In November, Adecco chairman Klaus Jacobs, who had taken on the CEO duties, said he was looking outside the firm for a replacement and wanted to find one as soon as possible.

Companies usually want to promote people from within for the top executive spots because they know the culture of the company, says recruiting consultant Peter Weddle. Given Adecco’s global scope, it is difficult to imagine that there was no one qualified for the job, he says.

Promoting someone from within was not considered because the firm is in the midst of transitioning its focus more toward professional staffing rather than just temporary staffing services, spokes­man Axel Schafmester says.

"We wanted someone with a proven track record in professional staffing," he says, noting that DIS is a leader in this space. He adds that acquiring the top executives at DIS, while one of the primary reasons for the purchase, was not the sole motivation for the deal. "This purchase also puts us at No. 2 in the German market, where we had not been very strong," he says.

Also, Adecco may have put such a high premium on finding outside talent because of its issues in the U.S., says Andrew Brooks, a research analyst in the London office of Dresdner Kleinwort Was­serstein.

"Given the management changes they had already seen, it may have been too destabilizing to rip someone out from where they were," he says.

Also, bringing in outsiders through an acquisition gives Adecco the opportunity to build a new culture and implement new procedures, says Andy Oelbaum, president of ExecPay, a Port Washington, New York, compensation consulting firm.

But Brooks is skeptical whether the price Adecco paid is worth the management it got. He notes that de Daniel is only 29 years old and that both he and Scheiff don’t have experience outside the German market.

"They have no exposure to some of the bigger blue-collar markets," Brooks says. "All they know is the high-growth German market."

Adecco, he says, is "taking a big gamble."

--Jessica Marquez

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