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The global Mergers & Acquisitions market for recruitment firms is on the rise following a significant recovery in deal flow over the past 12 months, according to Cavendish Corporate Finance. The sector appears to have finally emerged from the fall out of the 2007/2008 global economic crisis. The UK, which is the third largest global HR services market behind the US and Japan, is leading the revival. Transaction volume is up by 70%, rising from 22 deals in 2010 to 37 deals in 2012. This outpaced Europe, where deal volume rose by close to 40% from 56 in 2010 to 77 in 2012.
The impact of this renewed interest in recruitment firms has been healthy rise in valuations, with the median EBITDA multiple on transactions rising to 9.8x last year from 7x in 2010. Most of the deals so far have been in the mid-market, with target companies having a median annual revenue of close to £20 million.
Factors behind the increase in deal flow include the gathering economic recovery, the return of private equity buyers to the market, the need for recruitment businesses to follow their clients as they move into new markets, the rise in temporary/contingent working, which has meant recruitment firms have had to expand into this area, often through acquisition, and consolidation as larger players acquire smaller competitors.
Caroline Belcher, Partner at Cavendish Corporate Finance, commented: “The overall revival in recruitment sector M&A globally has clearly been mirrored in the UK, with the strong, 70% rise in deal flow last year outpacing Europe. Quoted deal multiples have also increased by around 40%, from 7 times in 2010 to 9.8 times last year and areas which are commanding the most interest are specialist recruitment firms in sectors such as IT, Oil & Gas and Healthcare. Our pipeline of potential deals is the strongest it has been for about five years and we think the outlook for selling recruitment businesses will only improve going forward.”