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Corporate Resource Services (CRRS) To Acquire Summit Software

|Includes: Corporate Resource Services, Inc. (CRRS)

Corporate Resource Services, a staffing, recruiting, and consulting services firm, has finalized negotiations regarding its purchase of the Summit Software division of Tri-Tel Communications Inc. The acquisition is expected to close upon completion of customary approval requirements and closing conditions. Financial details of the deal were not disclosed.

Summit Software, an enterprise software applications company focused on the professional employer organization (NYSE:PEO) industry provides outsourcing and management of human resources, employee benefits, payroll, and workers' compensation.

CRRS plans to tap into its own client base to refine Summit Software's current technology and create additional revenue.

"With the acquisition of Summit Software, we are taking an important step in executing Corporate Resource Services' strategic plan," John Messina, CRRS' CEO, stated in the press release. " …. With healthy profit margins and excellent opportunities for growth, Summit's technology touches millions of people through more than 270 PEO and other clients and their base of customers. While maintaining the privacy of those customers and all of their respective employees, we believe that we can partner with our clients to transform Summit's application into a predictable marketing channel and create another revenue stream."

Sean Flanagan, president of Summit Software, said the company has already taken steps to hone its software and demographic criteria to fit CRRS' strategy. In addition, it has begun efforts to create a working prototype for the system in the first half of 2013.

CRRS CFO Mike Golde detailed the financial vantage points of the acquisition in correlation with CRRS' business strategy, as well as his expectations for the impact of the Obama Administration's Affordable Care Act.

"The improvement in our profit margins is a key factor in our strategic plan," Golde stated. "We have invested in our professional services business, particularly in accounting, finance and IT, and we are experiencing superior growth of these services as a result. … However, we also believe that there are excellent growth opportunities for all of our areas of specialty, including light industrial work, which typically generates lower margins. While we will continue to focus on adding higher-margin business and shift our overall business mix as a result, we don't want to sacrifice the growth we are experiencing in light industrial and managed services. We agree with the views expressed by some financial commentators that the Affordable Care Act (commonly known as "Obamacare") will drive demand for temporary services. We believe that the growth generated by Obamacare compliance will likely be significant with respect to lower-skilled labor."

Golde noted Summit Software's gross margins (above 60%) and operating margins (above 30%) in saying he believes the company's results will improve CRRS' overall profit margins. The acquisition is expected to be accretive to CRRS' 2013 net income, though the impact on the first quarter is expected to be negligible as Summit's operations are integrated.

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