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Tampa staffing firm CoAdvantage has nine-figure deal

Margie Manning

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Photo by rawpixel on Unsplash

An entity associated with a New York private equity firm that is buying Tampa staffing firm CoAdvantage raised $355 million in an equity offering in September.

AQ Carver Parent L.P., associated with Aquiline Capital Partners, disclosed the offering in a filing with the U.S. Securities and Exchange Commission late Friday.

The filing said the offering was made in connection with a merger or acquisition, and that Clinton Burgess, who is CEO of CoAdvantage, also is CEO of the issuer, AQ Carver.

Clinton Burgess

A spokesman for Aquiline declined comment and referred questions to CoAdvantage. A request for comment from CoAdvantage was pending return.

CoAdvantage said in July that it had agreed to be acquired by Aquiline, a private equity firm that invests in financial services and technology. CoAdvantage, which provides human resources services, including payroll, tax processing, risk management and governmental compliance, to small and mid-size businesses, had $4.6 billion in 2018 revenue and was ranked No. 3,772 on the 2019 Inc. 5000.

The seller is Morgan Stanley Capital Partners, which has owned a majority stake in CoAdvantage since 2015. Since then, CoAdvantage bought three other companies, including Progressive Employer Management Services Co., a 2017 deal that significantly transformed its scale and capabilities.

Separately, Moody’s Investors Service assigned speculative credit ratings to AQ Carver Buyer Inc., which does business as CoAdvantage, Moody’s said in a Sept. 4 report. Moody’s assigned a B3 corporate family rating to the company, and a B2 rating to a planned credit facility that included a $325 million loan. Both ratings are below investment grade.

The  proceeds of the new debt financing will be used to partially fund the purchase of CoAdvantage by Aquiline Capital Partners, Moody’s said.

Moody’s said CoAdvantage has relatively small scale compared to other companies in the professional employer organization industry. CoAdvantage also has a relatively high level of debt compared to its earnings, Moody’s said.

Other risks Moody’s cited were CoAdvantage’s revenue concentration in the southeast U.S., and turnover in its customer base. CoAdvantage lost one large client in December 2018, Moody’s said.

The risks are partially offset by the company’s recurring revenue sales model and healthy net customer growth trends that have helped the company improve its market presence, Moody’s said.

Moody’s assigned a stable outlook to CoAdvantage, saying it reflects an expected moderate decline in sales this year, followed by low single digit rate sales increases in 2020 fueled by net new client additions and expanding payrolls of existing clients.

Standard & Poor’s assigned a B- credit rating to CoAdvantage, citing similar reasons in its own Sept. 4 report.

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