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The business services market is the third largest sector of the
domestic economy, at $400 billion in annual spending. Business services
is a broad sector comprised of many outsourced services such as
accounting, benefits administration, marketing research, training
and certification, document management, staffing, human resources,
purchasing, logistics management, and facilities maintenance.
We believe the business services market is attractive for several
reasons. First, the continued restructuring of corporate America
has resulted in businesses focused on their core competencies with
more of their ancillary activities outsourced. This has facilitated
the development of a large and fast-growing business services sector.
Second, aside from the large size of the overall market, nearly
all of the market's sub-segments are estimated to be growing at
over 10% annually, with several growing as fast as 40%. Last, with
rare exceptions, business services companies have low capital expenditure
requirements and high margins—in many cases, these companies have
capital expenditure requirements below 1% of revenues with low fixed
asset bases, allowing for very attractive returns on invested capital.
As the outlook for business services is excellent and as companies
of all sizes continue to outsource costly, time-consuming, non-core
functions, we will continue to proactively seek out opportunities
in this attractive sector.
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