A Busy M&A Bazaar
What buyers, sellers are looking for in 2013
By Theo Vadpey
The great number of ﬁrms in the fragmented U.S. staﬃng industry makes M&A activity a common occurrence. In fact, data from our 2012 annual Staﬃng Company Survey show that one in three staﬃng ﬁrms made at least one acquisition in the last three years.
And it’s been an unusually busy year. In July 2012, we noticed that the number of publicly announced M&A deals was up signiﬁcantly from a year ago. We reported 34 publicly announced deals, up from 22 in the ﬁrst half of 2011. Our monthly Pulse Survey also showed an uptick in ﬁrms reporting having closed an acquisition — in May and June 2012, 4 percent of ﬁrms reported closing an acquisition, well above the trailing 12-month average of 2.8 percent.
Noting the uptick in M&A interest, Staﬃng Industry Analysts took a look at the acquirers and came up with four interesting interpretations to help you make M&A related decisions in 2013.
- What temp segments are hot? According to our recent survey data — which includes 128 unique staﬃng ﬁrms that made acquisitions in the past three years — the healthcare and IT segments topped the list of desirable temporary staﬃng segments, accounting for nearly half of respondents’ stated preferences. About 20 percent of respondents expressed interest in commercial staﬃng. Interestingly, while legal staﬃng accounted for 12 percent of publicly announced acquisitions in the ﬁrst half of this year, very few survey respondents — 0.6 percent — expressed interest in making acquisitions in this segment.
- What other staﬃng services are in demand? Companies also indicated some services areas aside from temporary staﬃng they might be interested in acquiring. Direct hire topped the list by a wide margin, representing the preferences of 20 percent of respondents—other areas of interest included solutions/statement of work (SOW) consulting (7.8 percent), RPO (6.3 percent), and MSP (5.7 percent).
- Latest valuations. Of 33 companies that shared with us the average price-revenue multiple they paid for companies acquired in 2012, half of respondents reported paying 0.6x revenue or less. Nearly 20 percent of respondents reported paying 0.2x revenue or less. Of interest, while the distribution of price-revenue multiples was skewed to the right (lower valuations were more frequent), the distribution of price-EBITDA multiples of acquired ﬁrms was fairly uniform (the median price-EBITDA multiple was 3.0x among our respondents).
- An advisor is uncommon. A majority, 60 percent, of ﬁrms in our survey did not consult any advisor whatsoever in their acquisition process. Ten percent, however consulted a lawyer, and another 10 percent did consult an M&A advisory specialist.
So what does this mean for 2013? Where is M&A going? Jon Osborne, vice president, research and editorial, at Staﬃng Industry Analysts, says the current interest in M&A is no ﬂuke: “M&A activity has historically been correlated with the overall health of the staﬃng industry, and the industry is doing pretty well right now. Each year we put together a list of staﬃng ﬁrms who are seeking target acquisitions, to help buyers and sellers meet up. This year we had 162 staﬃng ﬁrms join the Acquirers list, up from 91 in 2011 and 119 in 2010. Interest in M&A is strong.”
Theo Vadpey is a research assistant with Staffing Industry Analysts. He can be reached at firstname.lastname@example.org.